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DOCUMENTS 
DEPT. 


^^^'^yi^M^o. 


SENATE 


REPORT 


No.  370 


OF  THE 


-n  <; 


JOINT  SPECIAL  RECESS  COMMITTEE 


ON 


WoEKMEN's  Compensation  Insueance  Rates 
AND  Accident  Peevention. 


February,    1917. 


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BOSTON: 
WRIGHT  &  POTTER  PRINTING  CO.,  STATE   PRINTERS, 

32   DERNE  STREET. 
1917. 


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®()c  Commontocaltl)  of  iHassacljuseto. 


REPORT  OF  JOINT  SPECIAL  COMMITTEE  ON  WORK- 
MEN'S COMPENSATION  INSURANCE  RATES  AND 
ACCIDENT   PREVENTION. 


To  the  Honorable  Senate  and  House  of  Representatives  of  the  Commonwealth 

of  Massachusetts. 

The  Joint  Special  Committee  on  Workmen's  Compensation 
Insurance  Rates  and  Accident  Prevention  appointed  under  joint 
order  of  the  Senate  and  House  of  Representatives,  adopted 
June  2,  1916,  has  the  honor  to  submit  herewith  its  report. 

The  purpose  of  the  Legislature  in  providing  for  the  appoint- 
ment of  the  committee  was  outlined  in  its  order  as  follows:  — 

...  to  investigate  the  subject-matter  contained  in  the  message  of 
His  Excellency  the  Governor,  printed  as  Senate  Document  No.  444,  with 
special  reference  to  the  problems  of  rate  making  and  accident  prevention 
under  the  provisions  of  chapter  751  of  the  Acts  of  the  year  1911,  known 
as  the  workmen's  compensation  act,  and  acts  in  amendment  thereof  and 
in  addition  thereto. 

The  message  of  His  Excellency  the  Governor,  so  far  as  it  per- 
tained to  the  question,  was  as  follows :  — 

Executive  Department,  Boston,  April  21,  1916. 

To  the  Honorable  Senate  and  House  of  Representatives. 

By  an  act  of  the  year  1913  the  Legislature  created  a  Joint  Board,  com- 
posed of  the  Board  of  Labor  and  Industries  and  the  Industrial  Accident 
Board,  charged  with  the  duty  of  bringing  about  a  reduction  in  the  number 
of  occupational  injuries  and  diseases.  It  was  designed  to  secure  this  re- 
duction in  two  ways :  first,  by  the  studj^  of  mechanical  safety  appliances, 
and,  in  co-operation  with  the  employers  of  labor,  securmg  their  adoption 
in  the  places  of  employment;  and  second,  by  inculcatmg  so  far  as  possible 
the  thought  of  care  so  that  such  injuries  and  diseases  might  be  prevented 


bOliTOS 


.'.  :.;;4-;.-.;  ;;  COMFJiNSATION  INSURANCE  RATES.        [Feb. 


t  m    t 


by  precautions  not  mechanical,  but  which  the  individual  worker  and  em- 
ployer would  follow.  The  operations  of  this  Joint  Board  have  not  proved 
effective  in  any  material  degree.  This  results  largely  from  the  fact  that 
each  Board  has  a  separate  jurisdiction  of  its  own.  The  meeting  of  the 
Joint  Board  is  held  only  once  in  a  fortnight,  and  the  statistics  that  have 
been  collected  relating  to  accidents  and  to  occupational  diseases  have  not 
even  been  digested  and  intelligent  deductions  draVrTi  from  them.  There 
are  about  500  deaths  caused  each  year  by  accidents  in  the  industries  of 
Massachusetts,  and  about  125,000  injuries  which  are  not  fatal.  It  is 
believed  that  this  dejjlorable  number  of  deaths  and  injuries  may  be  re- 
duced by  one-half  by  the  adoption  of  precautions  which  are  obtainable. 
It  is  fairly  deducible  from  the  experience  of  manufacturing  concerns  in 
this  State  and  other  parts  of  the  country  that  the  number  may  be  reduced 
in  that  ratio.  This  is  a  subject  of  such  great  importance  to  the  workers 
of  the  Commonwealth,  and  to  its  industries  and  to  the  broad  subject  of 
workmen's  compensation,  that  it  may  be  said  to  lie  at  the  foundation  of 
that  system. 

I  recommend  that  an  act  be  passed  transferring  the  powers  and  duties 
of  this  Joint  Board  to  the  Industrial  Accident  Board,  and  that  the  In- 
dustrial Accident  Board  be  empowered  to  appoint  a  deputy  or  some  other 
officer  who  shall  act  under  its  direction  and  control  for  the  purpose  of 
furthering  the  administration  of  said  jurisdiction  now  exercised  by  the 
Joint  Board  and  of  securing  a  reduction  in  the  number  of  occupational 
injuries  and  diseases.  Such  a  deputy  or  officer  should  be  provided  with 
a  salary  sufficient  to  attract  the  services  of  a  man  thoroughly  qualified 
to  perform  the  very  important  duties  of  the  position. 

One  step  in  securing  a  reduction  in  the  number  of  accidents  would  be 
taken  by  establishing  a  merit  rating  for  the  employers  according  to  the 
safety  appliances  and  precautions  put  in  force  b}^  them,  so  that  they 
might  have  the  benefit  of  a  reduction  of  the  number  of  injuries  in  lower 
rates  of  insurance.  Such  a  system  already  prevails  in  fixmg  the  I'ates  in 
case  of  fire  insurance,  and  the  policy  holders  may  have  their  rates  very 
greatly  reduced  by  the  adoption  of  appliances  and  systems  for  the  pre- 
vention and  for  the  stopping  of  fires.  It  has  already  been  initiated  and 
it  should  be  much  further  extended  in  workmen's  compensation  insur- 
ance. A  system  so  rational  would  have  the  co-operation  of  the  emploj-ers 
and  the  workers  as  well  as  of  the  msurance  companies. 

The  law  provides  that  the  Insurance  Commissioner  shall  require  the 
fixing  of  adequate  rates  for  workmen's  compensation  insurance.  The 
companies,  of  course,  should  not  be  permitted  to  indulge  in  unrestricted 
competition  by  the  adoption  of  rates  which  would  not  be  adequate  to  the 
insurance  they  extended,  and  v/hich  might  result  m  the  destruction  of 
weaker  companies  and  the  creation  of  insurance  monopolies,  and  an  ulti- 
mate increase  in  rates.  But,  on  the  other  hand,  they  should  not  be  re- 
quired to  exact  a  greater  rate  from  their  policy  holders  than  was  reasonably 
adequate  to  pay  the  expense  of  the  msurance.    The  law  at  present  con- 


1917.]  SENATE  — No.  370.  5 

templates  the  establishment  of  a  rate  which  is  adequate,  and  it  stops 
there,  and  does  not  concern  itself  with  the  maximum  rate.  Thus  there  is 
no  adequate  protection  in  law  to  the  insured  against  excessive  rates.  If 
the  play  of  natural  forces  is  to  be  set  aside  in  order  to  protect  the  com- 
panies, why  should  it  not  be  set  aside  in  order  to  protect  the  employers? 
So  long  as  the  Insurance  Commissioner  is  to  have  the  power  over  com- 
pensation rates  wliich  he  does  not  have  over  rates  in  other  forms  of  in- 
surance, I  recommend  that  the  Legislature  consider  the  advisability  of 
establishing  standards  for  the  adequacy  of  compensation  rates,  to  the  end 
that  unreasonable  rates  may  not  be  permitted.  The  Legislature  has 
wisely  increased  the  compensation  established  by  the  original  act,  and 
reduced  the  waiting  period  from  fourteen  to  ten  daj^s.  It  was  urged  that 
such  increase  would  not  result  in  an  increase  of  insurance  rates.  But 
clearly  the  increase  of  benefits  alone  would  increase  the  cost  of  the  in- 
surance, and  if  the  rates  were  not  correspondingly  increased  it  would 
follow  that  the  rates  previouslj^  in  existence  were  excessive.  It  may  be 
that  some  of  the  rates  were  not  excessive,  but  if  any  of  them  were,  and  if 
excessive  rates  have  existed  under  compulsion  from  the  Commonwealth 
in  the  past,  such  a  thing  should  not  be  permitted  in  the  future.  No  one 
would  question  the  soundness  of  the  principle  that  the  companies  fur- 
nishing compensation  insurance  should  be  permitted  to  charge  a  rate  wliich 
would  enable  them  to  carry  the  insurance  without  a  loss  and  to  maintain 
their  solvency. 

In  pursuance  of  the  order  of  the  General  Court,  the  President 
of  the  Senate  named  as  members  of  the  committee  from  the 
Senate,  Hon.  James  F.  Cavanagh  of  Everett,  Hon.  George  H. 
Jackson  of  Lynn,  and  Hon.  John  F.  Sheehan  of  Holyoke;  and 
the  Speaker  of  the  House  of  Representa,tives  named  as  members 
of  the  committee  from  the  House,  Representative  William  W. 
Kennard  of  Somerville,  Representative  Essex  S.  Abbott  of 
Haverhill,  R.epresentative  John  G.  Faxon  of  Fitchburg,  Repre- 
sentative Robert  T.  Kent  of  Pittsfield,  Representative  William 
H.  Sullivan  of  Boston,  and  Representative  Charles  F.  Garrity 
of  Worcester. 

The  committee  held  its  first  meeting  on  June  19,  1916. 
Grover  C.  Hoyt  of  Boston  was  elected  secretary. 

Headquarters  were  immediately  established  in  Rooms  433 
and  435,  State  House,  where  all  persons  interested  in  the 
subject  of  w^orkmen's  compensation  insurance  rates  and  accident 
prevention  might  meet  members  of  the  committee  or  the  secre- 
tarv. 


6  COMPENSATION  INSURANCE  RATES.         [Feb. 

In  order  to  get  the  views  of  as  many  persons  as  possible  on 
the  various  aspects  of  the  problem  which  confronted   it,   the 
.  committee  decided  to  hold  a  number  of  public  hearings.    During 
a  period  of  about  five  months  many  such  hearings  were  held. 

It  was  the  desire  of  the  committee  to  get  the  viewpoints  of 
employers  of  labor,  employees,  the  insurance  companies  and  the 
general  public,  and  to  this  end  various  interests  were  requested 
to  appear  before  it,  to  give  expression  to  their  ideas  or  to  make 
suggestions.  Boards  of  trade  and  business  organizations  to  the 
number  of  130  were  so  invited.  Few  of  said  organizations 
appeared  or  offered  suggestions.  Ninety-tw^o  Central  Labor 
Unions  and  Local  Councils  of  Labor  were  notified.  Th6re 
appeared,  on  behalf  of  labor,  members  of  the  legislative  com- 
mittee of  the  American  Federation  of  Labor,  and  representa- 
tives of  the  Textile  Workers,  Brockton  Shoe  Workers,  State 
Council  of  Carpenters,  Wage  Earners  Clubs  and  many  Central 
Labor  Unions.  Individual  employers  appeared  before  the  com- 
mittee, as  well  as  representatives  of  the  Associated  Industries 
of  Massachusetts. 

Your  committee  was  advised  that  tw^enty-four  stock  and 
mutual  insurance  companies  were  transacting  workmen's  com- 
pensation insurance  in  Massachusetts,  and  these  twenty-four 
companies  were  requested  to  come  before  the  committee. 
Representatives  of  eight  of  these  companies  appeared  before  the 
committee  and  were  heard.  The  Insurance  Brokers  Association 
of  Massachusetts  requested  to  be  heard,  and  a  special  meeting 
was  assigned  at  which  it  was  represented  by  its  secretary. 

During  the  course  of  the  hearings  the  subjects  of  rating 
bureaus,  State  fund  and  self-insurance  were  emphasized  as  im- 
portant factors  in  the  establishment  of  premium  rates  and  in 
preventing  accidents. 

The  committee  made  a  careful  analysis  of  these  matters  for 
data  available,  but,  deeming  it  advisable  to  get  information  at 
first  hand,  visited  New  York  City,  Columbus,  Ohio,  and 
Washington,  D.  C.  In  New  York  City  a  close  study  was  made 
of  the  National  Workmen's  Compensation  Service  Bureau,  and 
in  Columbus,  Ohio,  of  the  Ohio  State  fund  and  the  system  of 
self-insurance.  In  Washington  the  committee  sat  in  the  Con- 
ference  on   Social   Insurance,   held   under  the   auspices   of  the 


1917.]  SENATE  — No.  370.  7 

International  Association  of  Industrial  Accident  Boards  and 
Commissions,  and  heard  from  the  lips  of  commissioners  of  many 
States,  insurance  company  officials,  large  self-insurers  and 
manufacturers  the  story  of  workmen's  compensation  and 
accident  prevention. 

Your  committee  desires  at  this  time  to  express  its  thanks  to 
the  following  gentlemen  for  courtesies  extended :  — 

Prof.  Albert  W.  Whitney,  general  manager  of  the  National 
Workmen's  Compensation  Service  Bureau,  and  his  associates; 
Mr.  Harwood  E.  Ryan  of  the  New  York  State  Insurance  De- 
partment; Mr.  Wallace  D.  Yaple,  chairman  of  the  Ohio  In- 
dustrial Commission,  and  his  associates;  Insurance  Commis- 
sioner Frank  Taggart  and  Governor  Frank  B.  Willis  of  Ohio; 
and  Mr.  Dudley  M.  Holman,  president  of  the  International 
Association  of  Industrial  Accident  Boards  and  Commissions. 

EARLY  HISTORY. 

Massachusetts  took  its  first  step  in  dealing  with  industrial 
accidents  in  1887,  under  the  Massachusetts  employers'  liability 
law  (St.  1887,  ch.  27(3),  which  was  the  first  employers'  liability 
law  enacted  in  the  United  States.  This  law  remedied  many  of 
the  defects  in  the  operation  of  the  common  law,  particularly 
with  respect  to  the  doctrine  of  fellow  servant.  But  it  was  soon 
found  that  it  not  only  failed  to  do  equal  justice  to  employees, 
but  brought  about  a  great  increase  in  litigation,  with  all  the 
attendant  evils  of  economic  waste. 

Not  much  public  interest  was  evidenced  on  the  subject,  how- 
ever, until  the  passage  of  the  first  compensation  act  in  England 
in  1897.  Germany  had  previous!}'  enacted  a  system  of  social 
insurance  covering  sickness  and  accident,  as  a  result  of  an  in- 
vestigation which  was  reported  in  1882. 

Increasing  agitation  followed  the  passage  of  the  English 
compensation  act,  and  in  1903  a  commission  was  appointed, 
with  Carroll  D.  Wright  as  chairman,  to  investigate  the  relation 
of  employer  and  employees.  That  commission  made  an  investi- 
gation during  the  summer  of  1903  and  presented  its  report  to 
the  Legislature  in  1904,  with  a  draft  of  a  compensation  act 
modeled  after  that  which  had  been  adopted  in  England. 
(Report  of  committee  on  relations  between  employers  and  em- 


8  COIMPEiXSATIOX  INSURANCE  RATES.         [Feb. 

ployees,  Jan.  13,  1904,  paragraphs  47-55.)  This  act  failed  to 
pass  the  Legislature,  but  the  report  of  the  commission  and  the 
effort  to  pass  the  proposed  act  excited  so  much  interest  that  a 
similar  measure  was  introduced  in  the  legislative  sessions  of 
1905  and  1906,  but  each  year  it  was  defeated. 

In  1907  a  joint  special  committee  on  labor,  consisting  of  three 
members  of  the  Senate  and  eight  members  of  the  House,  was 
appointed  to  sit  during  the  recess  of  the  General  Court  to  con- 
sider workmen's  compensation  among  other  questions.  That 
committee  held  hearings  during  the  summer  of  1907  and  made 
its  report  to  the  Legislature  on  Jan.  24,  1908.  (House  Docu- 
ment No.  1190  of  1908.)  x4.mong  the  measures  submitted  to  it 
was  a  compensation  act  identical  with  that  recommended  by 
the  commission  of  1903,  which  had  been  rejected  by  previous 
Legislatures.  (House  Document  No.  402  of  1907.)  The  com- 
mittee, however,  was  unable  to  come  to  an  agreement  on  the 
question.  A  majority  was  opposed  to  a  general  compulsory  act 
and  to  any  change  in  the  employers'  liability  law.  They  favored 
a  voluntary  law  which  would  permit  employers  to  enter  into 
contracts  with  their  employees  to  substitute  a  plan  of  compen- 
sation for  their  legal  liability  under  existing  laws,  and  framed 
an  act  embodying  its  principles.  A  minority  favored  a  com- 
pulsory compensation  act  and  submitted  a  draft  of  such  an  act, 
but  the  Legislature  enacted  the  voluntary  law  reported  by  the 
majority.     (St.  1908,  ch.  489.) 

In  1909  the  act  was  amended  so  as  to  permit  employees  as 
well  as  employers  to  submit  to  the  State  Board  of  Conciliation 
and  Arbitration  plans  for  contractual  compensation.  (St.  1909, 
ch.  514,  sects.  136-140.) 

Meanwhile  the  sentiment  in  favor  of  workmen's  compensation 
was  grov/ing,  being  supported  by  many  employers  of  labor  as 
well  as  by  labor  organizations,  and  in  1910  a  resolve  was  passed 
creating  a  commission  "to  determine  upon  a  plan  of  compensat- 
ing employees  for  injuries  received  in  the  course  of  their  em- 
ployment" (Res.  1910,  ch.  120).  Under  the  terms  of  that 
resolve  the  commission  reported  May  20,  1911,  submitting 
three  bills  (see  House  Document  No.  1925  of  1911)  which  were 
described  in  the  report  as  follows :  — 


1917.]  SENATE  — No.  370.  9 

The  act  submitted  by  Messrs.  Saunders  and  Parks  provides  for  volun- 
tary mutual  insurance  of  employees  by  employers,  and  repeals  certain 
existing  defences. 

The  act  submitted  by  Mr.  Lowell  provides  for  compulsory  compen- 
sation paid  to  employees  by  employers. 

The  act  submitted  by  Mr.  Alexander  provides  for  universal  compulsory 
mutual  insurance  of  employees,  supported  by  contributions  by  both 
employers  and  employees. 

The  bills  were  referred  to  the  joint  committee  on  the  judi- 
ciary; many  hearings  were  held,  and  the  committee  reported 
the  bill  submitted  by  Messrs.  Saunders  and  Parks.  (House 
Document  No.  2154  of  1911.) 

That  bill  provided  for  the  creation  of  the  Massachusetts  Em- 
ployees Insurance  Association.  It  required  the  Governor  to 
appoint  a  board  of  directors  consisting  of  fifteen  members  who 
were  to  proceed  to  form  the  company;  all  employers  of  labor 
accepting  the  compensation  system  would  do  so  by  procuring  a 
policy  of  insurance  in  the  company,  and  automatically,  in  event 
of  injury,  their  employees  would  be  entitled  to  compensation  in 
accordance  with  the  provisions  of  the  act.  The  first  board  of 
directors  was  allowed  to  spend  $15,000  of  the  State's  money  for 
the  purpose  of  organizing,  but  the  association  was  to  be  self- 
supporting. 

The  bill  passed  the  House  of  Representatives  without  change. 
In  the  Senate,  however,  as  a  result  of  the  persistent  efforts  of 
the  stock  insurance  companies,  and  against  the  protest  of  labor 
organizations,  it  was  amended  so  as  to  give  all  liability  insurance 
companies  the  right  to  carry  workmen's  compensation  insur- 
ance, thus  making  such  companies  active  competitors  of  the 
mutual  company  created  by  the  act.  (St.  1911,  ch.  751,  Part 
v.,  sect.  3.) 

The  following  year  this  act  was  amended  by  the  insertion  of 
a  provision  requiring  any  liability  insurance  company  desiring 
to  carry  workmen's  compensation  insurance  to  file  with  the 
Insurance  Commissioner  its  classifications  of  risks  and  premiums 
relating  thereto  and  any  subsequent  proposed  classifications  or 
premiums,  and  suspending  the  operation  thereof  until  approved 
by  the  Insurance  Commissioner  as  adequate  for  the  risks  to 


10  COMPENSATION  INSURANCE  RATES.         [Feb. 

which  they  respectively  applied.  (St.  1912,  ch.  571,  sect.  17.) 
Chapter  666  of  the  acts  of  the  same  year  authorized  the  Insur- 
ance Commissioner  to  withdraw  his  approval  of  any  premium  or 
distribution  to  subscribers  of  the  Massachusetts  EmploA'ees  In- 
surance Association,  or  of  any  premium  or  rate  made  by  an 
insurance  company  and  approved  by  him  under  the  statute 
above  quoted. 

The  Massachusetts  Employees  Insurance  Association  having 
complied  with  the  law,  the  Insurance  Commissioner  on  June  27, 
1912,  issued  to  that  company  a  license  to  write  policies.  Two 
mutual  and  twenty-four  stock  companies  were  also  authorized 
to  write  workmen's  compensation  insurance  in  Massachusetts. 
The  classifications  of  risks  and  rates  and  the  rules  pertaining 
thereto  were  filed  with  the  Insurance  Commissioner  prior  to 
July  1,  1912,  and  in  accordance  with  section  3  of  chapter  751 
of  the  Acts  of  1911,  as  amended  by  section  17  of  chapter  571 
of  the  Acts  of  1912,  were  approved  by  him  as  adequate. 

The  Insurance  Commissioner,  in  a  statement  before  the  joint 
committee  on  the  judiciary,  INIay  1,  1916,  which  statement  is 
quoted  in  Part  II.  of  the  sixty-first  annual  report  of  the  Insur- 
ance Commissioner,  said :  — 

The  original  rates  were  pitched  too  high.  Reductions  were  allowed 
from  time  to  time,  and  no  serious  complaint  was  heard  from  any  company 
imtil  the  fourth  substantial  reduction  came  in  February  of  1914.  This 
reduction  was  approved  by  the  Insurance  Commissioner  for  rates  filed 
by  the  Employers  LiabiUty  Assurance  Corporation,  Ltd.,  acting  for  the 
stock  companies.  The  experience  figures  submitted  by  the  company 
appeared  to  indicate  that  the  reduction  was  justified,  when  the  benefits 
then  in  effect  were  taken  into  consideration. 

The  approval  of  this  reduction  brought  a  protest  from  the  ]Massachu- 
setts  Emplo3'ees  Insurance  Association,  which  questioned  the  accuracy 
and  conclusiveness  of  the  experience  filed,  and  held  that  the  resulting 
rates  were  too  low  for  many  of  the  classifications  involved,  and  that  the 
rates  in  question  were  the  result  of  the  combination  of  the  stock  companies 
for  the  purpose  of  suppressing  competition.  This  reduction  and  their 
contentions  with  respect  to  it  were  brought  to  the  attention  of  the  then 
Governor,  who  had  just  recommended  to  the  Legislature  certain  increases 
in  the  benefits  pro\aded  by  the  workmen's  compensation  act.  He  called 
into  conference  representatives  of  the  insurance  companies,  re\'iewed  the 
situation  with  them,  and,  after  an  imderstanding  was  reached  with  the 
leading  companies  to  the  effect  that  they  were  willing  to  undertake  to 


1917.]  SENATE  — Xo.  370.  11 

carry  the  insurance  at  the  new  rates,  the  matter  was  dropped  until  the 
bill  providing  for  the  increased  benefits  had  been  passed  by  the  Legisla- 
ture. The  Governor  then  sent  in  a  special  message,  calling  attention  to 
the  rate  situation  and  the  charges  that  the  rates  discrimmnted  imfairty 
against  certain  classes  of  employers  and  were  the  result  of  an  improper 
combination  of  insurance  companies,  and  recommended  legislation  to 
make  insurance  a  commodity  that  would  faU  within  the  provisions  of  the 
act  prohibiting  monopolies  in  restraint  of  trade.  The  Legislature  instead 
created  a  commission  to  investigate  practices  and  rates  in  insurance.  Li 
the  meantime  the  new  benefits  went  into  effect,  but  the  reduced  rates 
remained  the  same  until  the  recent  change,  ]\Iay  1,  1916. 

The  Commission  to  Investigate  Practices  and  Rates  in  In- 
surance, created  under  chapter  160  of  the  Resolves  of  1914,  of 
which  Insm-ance  Commissioner  Frank  H.  Hardison  and  the 
then  State  actuary,  William  J.  ^Montgomery,  were  members,  re- 
ported upon  the  question  of  rate  reduction  in  the  following 
language :  - — 

The  first  reduction  in  the  rates  of  the  stock  compames  took  place  on 
Aug.  30,  1912,  when  the  rate  for  laimdries  was  reduced.  Important  re- 
ductions have  been  made  four  times,  namely,  Oct.  1,  1912,  in  about  175 
classifications;  Feb.  15,  1913,  in  all  classifications;  July  1,  1913,  in  about 
225  classifications;  Feb.  2,  1914,  in  about  SOO  classifications. 

There  would  seem  to  be  little  doubt  but  that  the  reduction  of  Oct.  1, 
1912,  was  brought  about  largely  by  reason  of  competition.  This  reduc- 
tion resulted  approximately  as  follows:  Of  the  rates  reduced,  14  per  cent, 
were  reduced  less  than  10  per  cent.;  32  per  cent,  were  reduced  over  10  to 
15  per  cent. ;  33  per  cent,  were  reduced  over  15  to  20  per  cent. ;  21  per  cent, 
were  reduced  over  20  per  cent. 

The  second  important  reduction  took  effect  on  Feb.  15,  1913,  when  a 
flat  reduction  of  25  per  cent,  was  filed  and  approved  for  the  stock  com- 
panies. Sufficient  experience  had  been  developed  up  to  that  time  to  indi- 
cate that  rates  in  general  were  too  high  and  could  safely  be  reduced. 
Experience  in  individual  classifications,  however,  was  not  available,  and 
for  that  reason  no  attempt  was  made  to  make  a  scientific  reduction,  classi- 
fication by  classification,  but  a  flat  reduction  was  made  in  all  rates. 

Between  Feb.  15,  1913,  and  June  30,  1913,  other  reductions  were  made. 
The  principal  changes  were  in  the  metal  and  wood  schedules,  which  were 
revised  as  to  both  classifications  and  rates,  and  on  July  1,  1913,  reductions 
which  applied  principally  to  the  chemical,  leather,  limiber,  printing  and 
textile  industries  were  made. 

Some  time  previous  to  Feb.  1,  1914,  evidence  was  submitted  to  the 
insurance  department  that  the  rates  on  many  schedvdes  were  too  high,  and 


12  COMPENSATION  INSURANCE   RATES.         [Feb. 

besides  that  evidence  was  the  fact  that  the  American  Mutual  Liability- 
Insurance  Company  was  paying  a  30  per  cent,  dividend,  and  the  Massa- 
chusetts Employees  Insurance  Association  was  pajdng  to  its  general 
subscribers  dividends  of  from  20  to  30  per  cent,  on  substantially  the  same 
rates  as  charged  by  the  stock  companies.  (Pages  27,  28,  Report  on  Work- 
men's Compensation  Insurance,  1915.) 

The  commission,  under  the  heading,  "Reasonableness  of 
Rates,"  made  this  report:  — 

The  premium  rates  for  v\^orkmen's  compensation  msurance  in  Massa- 
chusetts have  been  obviously  unreasonable.  The  mutual  companies,  out 
of  premiums  which  until  about  a  year  ago  were  substantially  the  same  as 
charged  by  the  stock  companies,  had  been  paying  dividends  in  some  in- 
stances of  30  per  cent,  to  their  subscribers..  It  cannot  be  assumed  that 
the  mutuals  were  doing  business  at  a  loss.  The  logical  conclusion,  there- 
fore, is  that  compensation  insurance  companies,  stock  as  well  as  mutual, 
have  received  a  considerable  percentage  more  than  they  needed  to  pay  the 
benefits  and  carry  on  their  business  economically.  Of  course  the  increased 
benefits  provided  by  recent  legislation  change  this  situation. 

In  super\asing  the  rates  of  those  companies  in  Massachusetts  which  do 
business  also  outside  of  Massachusetts,  careful  consideration  should  be 
given  to  the  rates  they  are  charging,  and  their  expense  of  doing  business 
in  other  States;  for  while  the  lowest  possible  rates  consistent  T\ith  the 
solvency  of  the  companies  should  be  obtained  for  Massachusetts,  the 
depressing  of  rates  in  Massachusetts  without  similar  reductions  in  other 
territories  would  provide  the  desired  opportunity  to  eliminate  local 
competition. 

The  commission  recommended  a  readjustment  of  rates  and 
the  establishment  of  a  rate-making  bureau.  Its  report  was  for- 
warded to  the  General  Court  by  His  Excellency  David  I. 
Walsh,  with  a  message  (Senate  Document  No.  543  of  1915)  in 
which  His  Excellency  said  the  commission  "has  succeeded  in 
establishing  beyond  a  reasonable  doubt  the  following  facts, 
namely:  — 

That  there  is  no  competition  in  the  making  of  rates  for  insurance  against 
the  liability  of  employers  on  account  of  industrial  accidents,  but  that  the 
rates  are  in  fact,  by  agreement  between  the  companies,  fixed  by  a  smgle 
expert  in  their  employ. 

That  these  rates  are  in  many  cases  too  high,  owmg  chiefly  to  the  allow- 
ance of  excessive  and  ungraded  commissions  for  securing  new  business. 

That  a  great  advantage  in  regard  to  the  prevention  of  accidents  is  to 


1917.]  -  SENATE  — No.  370.  13 

be  expected  from  the  provision  of  schedule  rates,  with  proper  reductions 
in  favor  of  establislinients  where  safety  devices  are  installed  and  where 
due  precautions  against  accident  are  taken. 

The  legislation  proposed  by  the  commission  failed  of  passage 
in  the  General  Court,  and  the  Insurance  Commissioner  subse- 
quently recommended  to  the  companies  the  formation  of  a  rate- 
making  bureau.     As  a  result  of  his  recommendation,  in  July, 

1915,  the  Massachusetts  Rating  and  Inspection  Bureau  was 
organized  by  all  insurance  companies  transacting  workmen's 
compensation  insurance  in  Massachusetts.  The  Bureau  pre- 
pared a  new  schedule  of  rates  which  was  approved  March  24, 

1916,  to  go  into  effect  April  1,  1916. 

Immediately  upon  the  approval  of  these  rates  many  em- 
ployers complained  to  His  Excellency  Samuel  W.  McCall  that 
their  premiums  had  been  increased.  At  the  request  of  the 
Governor,  the  Insurance  Commissioner  postponed  the  taking 
effect  of  the  new  rates  until  May  1,  and  thereupon  His  Excel- 
lency sent  to  the  Legislature  the  message  quoted  on  page  3  of 
this  report.  It  was  referred  to  the  joint  committee  on  the 
judiciary;  extensive  hearings  were  given  and  several  bills  were 
presented  for  consideration.  Eventually  the  committee  re- 
ported a  bill  which  passed  the  House  of  Representatives,  but 
failed  of  passage  in  the  Senate.  Thereupon  His  Excellency  sent 
to  the  Legislature  a  second  message  asking  for  the  appointment 
of  a  recess  committee  to  study  the  question,  and  in  compliance 
with  his  request  this  committee  was  appointed. 

Part  I . 


METHODS    OF   INSURING   PAYMENT    OF    WORKMEN'S 

CO:^IPENSATION. 

Workmen's  compensation  is  in  operation  in  thirty-two  States 
of  the  LTnion;  four  methods  have  been  developed  for  insuring 
payment  of  benefits  to  the  injured  workm.en,  or  to  his  de- 
pendents in  case  of  his  death :  — 

1.  Insurance  in  a  stock  insurance  company. 

2.  Insurance  in  a  mutual  insurance  company. 

3.  Contribution  to  a  State  fund. 

4.  Self-insurance. 


14  COMPENSATION  INSURANCE  RATES.         [Feb. 

Under  the  Massachusetts  workmen's  compensation  act  only 
the  first  two  methods  are  recognized.  An  employer  of  labor 
who  desires  that  his  employees  shall  receive  the  benefits  of  the 
workmen's  compensation  act  takes  out  a  policy  of  insurance  in 
any  liability  insurance  company  authorized  to  do  business  in 
this  Commonwealth  (see  Acts  1911,  ch.  751,  Pt.  V.,  sect.  3, 
as  amended  by  Acts  1912,  ch.  571,  sect.  17),  and  at  present  he 
may  elect  whether  such  policy  shall  be  issued  by  a  mutual  or  a 
stock  company. 

Insurance  in  a  Stock  Insurance  Company. 

In  Massachusetts  a  stock  company  is  permitted  to  do  business 
if  it  has  a  capital  of  $200,000  and  has  complied  with  certain  re- 
quirements of  law.  Stock  insurance  companies  are  privately 
owned,  having  a  capital  divided  into  shares  of  stock  which  are 
sold  to  the  public  or  held  by  the  financial  men  who  organized 
the  company.  These  companies  are  managed  by  salaried 
ofiicers  and  are  run  for  profit.  They  charge  a  fixed  rate  of 
premium,  agreed  on  in  advance  of  the  issuing  of  the  policy, 
which  premium  is  a  certain  percentage  of  the  pay  roll  of  the 
employer,  or,  in  other  words,  is  a  certain  percentage  of  the 
wages  paid  by  the  insured  employer  to  his  employees.  Accord- 
ing to  the  report  of  the  Insurance  Commissioner  of  Massachu- 
setts under  date  of  Jan.  1,  1916  (Public  Document  No.  9,  Part 
II.,  page  xxiv.),  twenty-five  stock  companies  carried  workmen's 
compensation  insurance  risks  in  Massachusetts  during  a  part  of 
the  year  1915.  Five  of  these  companies  ceased  doing  work- 
men's compensation  insurance  during  1915  and  two  more  during 
1916. 

The  cost  to  the  stock  companies  of  handling  their  Massachu- 
setts workmen's  compensation  business,  as  reported  by  the  In- 
surance Commissioner,  averages  40.13  per  cent,  of  the  pre- 
miums collected.  In  the  tables  on  the  following  pages  are 
shown,  for  each  company  which  has  at  any  time  carried  work- 
men's compensation  risks,  its  total  receipts  from  premiums, 
together  with  its  payments  for  losses  and  expenses,  the  data 
being  furnished  by  the  insurance  department  of  the  Common- 
wealth. 


1917.]  SENATE  — No.  370.  15 


Insurance  in  a  Mutual  Insurance  Company. 

Under  the  laws  of  Massachusetts,  ten  or  more  persons  resi- 
dent in  this  Commonwealth  may  form  an  insurance  company 
on  the  mutual  plan,  to  transact  various  forms  of  liability  insur- 
ance which  stock  companies  may  be  authorized  to  transact,  and 
may  issue  policies  when  they  have  secured  applications  for  in- 
surance, the  premiums  for  which  shall  be  not  less  than  SoO,000; 
or  in  lieu  of  this,  applications  of  not  less  than  100  employers 
having  not  less  than  10,000  employees,  or  applications  from  not 
less  than  50  employers  having  not  less  than  5,000  employees, 
each  of  such  employers  having  become  obligated  by  the  by-laws 
of  the  company  for  an  amount  not  less  than  five  times  his  cash 
premium,  or  applications  from  not  less  than  50  employers  hav- 
ing not  less  than  5,000  employees,  accompanied  by  a  bond  of 
$100,000,  or  a  fund  of  S50,000  deposited  with  a  trustee. 

INIutual  insurance  companies  charge  a  fixed  rate  of  premium 
agreed  upon  in  advance,  as  do  stock  companies,  but  are  not  run 
for  profit.  Whatever  profit  is  made  is  returned  to  policy  holders 
in  the  form  of  dividends. 

According  to  the  report  of  the  Insurance  Commissioner  of 
Massachusetts,  dated  Jan.  1,  1916  (Public  Document  No.  9, 
Part  II.,  page  xxiv),  four  mutual  companies  were  doing  work- 
men's compensation  insurance  business  in  Massachusetts  in 
1915. 

The  average  expense  of  the  mutual  companies  is  reported  by 
the  Insurance  Commissioner  to  be  16.41  per  cent.,  or  23.72  per 
cent,  less  than  the  reported  average  expense  of  the  stock  com- 
panies. ^  The  expense  of  the  Massachusetts  Employees  Insur- 
ance Association,  which  is  a  company  created  under  the  work- 
men's compensation  act  (St.  1911,  ch.  751,  Part  IV.),  is 
reported  for  the  year  1915  to  be  14.85  per  cent.,  or  25.28  per 
cent,  less  than  the  average  expense  of  the  stock  companies. 

Contribution  to  a  State  Fund. 

The  advocates  of  a  State  fund  assert  that  the  State  in  estab- 
lishing a  system  of  compulsory  compensation,  or  a  system 
which  by  its  terms  impliedly  compels  compensation,  should,  as 
a  matter  of  fairness  and  equity,  establish  a  State  fund  for  the 


14  COMPEXSATIOX  IXSURAXCE  RATES.         [Feb. 

Under  the  Massachusetts  workmen's  compensation  act  only 
the  first  two  methods  are  recognized.  An  employer  of  labor 
who  desires  that  his  employees  shall  receive  the  benefits  of  the 
workmen's  compensation  act  takes  out  a  policy  of  insurance  in 
any  liability-  iasurance  company  authorized  to  do  business  in 
this  Commonwealth  'see  Acts  1911,  ch.  751.  Ft.  V.,  sect.  3, 
as  amended  by  Acts  1912,  ch.  571,  sect.  17),  and  at  present  he 
may  elect  whether  such  policy  shall  be  issued  by  a  mutual  or  a 
stock  company. 

IxsrEAXCE   EST  A  StOCK  IxsrHAXCE   CoiEPAXY. 

In  Massachusetts  a  stock  company  is  permitted  to  do  business 
if  it  has  a  capital  of  $200,000  and  has  complied  with  certain  re- 
quirements of  law.  Stock  insurance  companies  are  privately 
owned,  having  a  capital  divided  into  shares  of  stock  which  are 
sold  to  the  public  or  held  by  the  financial  men  who  organized 
the  company.  These  companies  are  managed  by  salaried 
officers  and  are  nm  for  profit.  They  charge  a  fixed  rate  of 
premium,  agreed  on  in  advance  of  the  issuing  of  the  policy, 
-wiiich  premium  is  a  cert:ain  percentage  of  the  pay  roll  of  the 
employer,  or,  in  other  words,  is  a  certain  percentage  of  the 
wages  paid  by  the  insured  employer  to  his  employees.  Accord- 
ing to  the  report  of  the  Insurance  Commissioner  of  IMassachu- 
setts  under  date  of  Jan.  1,  1916  (Public  Document  No.  9,  Part 
IL,  page  xdv.),  twenty-five  stock  companies  c-arried  workmen's 
compensation  insurance  risks  in  Massachusetts  during  a  part  of 
the  year  1915.  Five  of  these  companies  ceased  doing  work- 
men's compoisation  insurance  during  1915  and  two  more  during 
1916. 

The  cost  to  the  stock  c-ompanies  of  handling  their  Massachu- 
setts workmen's  compensation  business,  as  reported  by  the  In- 
surance Commissioner,  averages  40.13  per  cent,  of  the  pre- 
mitmis  collected.  In  the  tables  on  the  following  pages  are 
shown,  for  each  company  which  has  at  any  time  carried  work- 
men's compensation  risks,  its  total  receipts  from  premiums, 
together  with  its  payments  for  losses  and  expenses,  the  data 
being  famished  by  the  insurance  department  of  the  Comman- 
weahh. 


1917.1  SENATE  — No.  370L  15 


LvsuBAXCE  IN  A  Mutual  Ln'sitraxce:  Coiipaxy. 

Under  tte  laws  of  Massacliusetts^  tea  or  moire  persons  resi- 
dent in  this  Conunonwealtli  may  form  an  insurance  companr 
on  tte  mutual  plan,  to  transact  various  forms  of  Eabilfty  insur- 
ance which  stock  companies  may  be  authorized  to  transact^  and 
may  issue  policies  when  th.ey  have  secured  applications  for  in- 
surance, the  premiums  for  which,  shall  be  not  less  than  §50,000; 
or  in  lieu  of  this,  applications  of  not  less  than  100  employers 
having  not  less  than  10,000  employees,  or  apphcations  from  not 
less  than  50  employers  having  not  less  than  5,000  employees, 
each  of  such  employers  having  become  obligated  by  the  by4aws 
of  the  company  for  an  amount  not  less  than  five  times  his  cash 
premium,  or  applications  from  not  less  than  50  employers  hav- 
ing not  less  than  5,000  employees,  accompanied  by  a  bond  of 
^100,000,  or  a  fund  of  §50.000  deposited  with  a  trustee- 
Mutual  insurance  companies  charge  a  fised  rate  of  premium 
agreed  upon  in  advance,  as  do  stock  companies,  but  are  not  run 
for  profit.  Whatever  profit  is  made  is  returned  to  policy  holders 
in  the  form  of  dividends. 

According  to  the  report  of  the  Insurance  Commissioner  of 
Massachusetts,  dated  Jan.  1,  1916  (Public  Docimient  Nck.  9„ 
Part  II.,  page  xxiv),  four  mutual  companies  were  doing  work- 
men's compensation  insurance  business  in  Massachusetts  in 
1915. 

The  average  expense  of  the  mutual  companies  is  reported  hy 
the  Insurance  Commissioner  to  be  16-41  per  cent.,  or  23-72  per 
cent,  less  than  the  reported  average  e^^ense  ol  the  stock  com- 
panies. The  expense  of  the  Massachusetts  Employees  Insur- 
ance Association,  which  is  a  compan\-  created  under  the  work- 
men's compensation  act  (St.  1911,  ch.  751,  Part  IV-),  is 
reported  for  the  year  1915  to  be  14-85  per  cent-,  or  25-28  per- 
cent, less  than  the  average  expense  of  the  stock  comipanies- 

CONTKIBUTION   TO   A   SXATE   FrND. 

The  advocates  of  a  State  fimd  assert  that  the  State  in  estab- 
lishing a  system  of  compulsory  compensation,  oir  a  system 
which  by  its  terms  impliedly  compels  compensation,  shouM,  as 
a  matter  of  fairness  and  equity,  establish  a  State  fund  for  the 


18  COI\IPEx\SATIOx\  INSURANCE  RATES.         [Feb. 

of  premium  charged  by  stock  companies  operating  in  Ohio, 
and  asserts  that  the  liability  insurance  company  rates  are  132 
per  cent,  higher  than  the  rates  in  the  Ohio  State  fund.  In  the 
same  report  he  states  that  the  Ohio  jNIanufacturers  Association 
and  the  Ohio  State  Federation  of  Labor  at  their  respective 
annual  meetings  endorsed  the  Ohio  State  fund,  and  further,  he 
says:  — 

While  the  Ohio  State  insurance  plan  is  so  greatly  conserving  the  in- 
terests of  the  Ohio  employers,  is  it  properly  conserving  the  interests  of 
the  Ohio  emplo3^ees? 

I  have  heretofore  referred  to  the  scale  of  benefits  of  the  Ohio  plan  as 
compared  with  the  scale  of  benefits  of  the  surrounding  States. 

The  Industrial  Commission  has  before  it  to-day  less  than  9,000  pending 
claims.  In  the  month  of  May  alone  there  were  reported  to  the  commis- 
sion 10,506  claims.  This  certainly  demonstrates  that  the  claims  of  the 
injured  Ohio  employees  and  their  dependents  are  being  handled  with  the 
greatest  promptness. 

Moreover,  the  Ohio  State  insurance  plan  does  not  attempt  to  commer- 
cialize this  third  party,  who  bears  in  a  vast  number  of  instances  a  totally 
impersonal  relationship  as  applied  either  to  the  employer,  or,  when  com- 
mercialized, the  insurance  carrier.  This  is  precisel.y  the  reason  that  work- 
men's compensation  insurance  is  fundamentally  different  from  other  kinds 
of  insurance;  is  precisely  the  reason  that  the  Ohio  State  insurance  plan 
is  making  no  trespass  or  invasion  into  the  legitimate  fields  of  private 
enterprise,  but,  on  the  contrary,  is  simply  performing  an  obligatory,  and 
therefore  a  mandatory,  function  of  State  government. 

No  one  thing  was  contributed  to  the  development  and  spread  of  social- 
ism in  the  United  States  as  much  as  the  commercializing  of  injured  em- 
ploj'-ees  and  their  dependents  in  the  hands  of  the  liability  insurance 
companies;  conversely,  no  one  thing  has  more  greatly  retarded  the  devel- 
opment and  spread  of  socialism  in  Ohio  as  much  as  the  Ohio  State  in- 
surance plan,  for  the  very  clear  reason  that  it  has  removed  Ohio's  injured 
employees  and  their  dependents,  most  frequently  unfamiliar  with  their 
rights,  from  the  hands  of  claim  agents  representing  private  concerns 
organized  solely  for  profit. 

The  interests  of  the  general  public  are  to  a  great  extent  automatically 
taken  care  of  Avhen  the  interests  of  the  employers  and  employees  are 
conserved.  It  is  consequential  from  the  viewpoint  of  the  general  public, 
however,  whether  or  not  the  Industrial  Commission  economically  ad- 
ministers the  Ohio  State  insiu-ance  plan,  for  the  reason  that  the  cost  of 
the  same  is  paid  from  the  general  fund  of  the  State. 

The  degree  to  which  the  commission  is  economically  administering  the 
Ohio  plan  is  demonstrated  by  the  fact  that  the  commission  has  operated 


1917.]  SENATE  —  Xo.  370.  19 

the  same  at  an  expense  ratio  equivalent  to  only  1 1  per  cent,  of  the  earned 
premium,  as  compared  with  the  expense  ratio  of  the  liability  insurance 
companies  of  45  per  cent. 

Self-insurance. 

Self-insurance,  as  the  term  implies,  means  that  employers 
earn,'  their  own  insurance;  that  is,  that  they  pay  to  injured  em- 
ployees and  to  dependents  of  killed  employees  the  compensation 
benefits  as  provided  in  the  compensation  act,  and  pay  these  out 
of  a  fund  which  they  themselves  maintain. 

As  the  State  of  Ohio  has  the  best  developed  system  of  State 
fund,  so  it  also  has  as  an  alternative  the  best  developed  system 
of  self-insurance.  Prior  to  the  passage  of  the  workmen's  com- 
pensation act  in  Ohio,  several  very  large  and  financially  strong 
corporations,  employing  large  numbers  of  workmen,  had  insti- 
tuted systems  of  voluntary  relief  or  compensation  which  were 
carried  by  them  as  a  straight  charge  against  their  business, 
without  any  insurance.  They  had  adopted  this  practice  because 
it  offered  an  opportunity  to  deal  directly  with  injured  employees 
on  questions  of  settlement,  without  the  necessity  of  negotiating 
through  the  paid  adjuster  of  an  insurance  company.  They 
maintained  their  own  medical  and  surgical  equipment,  hospital 
with  nurses  and  other  comforts,  and  when  the  compensation  act 
was  made  compulsory  it  was  considered  advisable  to  allow 
these  large  manufacturers  to  continue  as  they  had  done,  under 
certain  restrictions. 

The  Industrial  Commission  of  Ohio  has  authority  in  its  dis- 
cretion to  grant  to  an  employer,  upon  application,  the  right  to 
conduct  self-insurance.  The  applicant  must  first  satisfy  the 
commission  of  his  financial  responsibility,  —  not  in  the  ordinary 
banking  sense,  but  in  the  sense  of  his  ability  to  weather  any 
accident  or  catastrophe;  of  his  ability  to  provide  proper  medical 
attention;  of  his  ability  to  administer  the  compensation  act  in 
the  broad  spirit  of  its  conception.  The  commission  when 
satisfied  grants  the  request  of  the  applicant  and  allows  him  to 
conduct  self-insurance.  All  acts  of  the  employer  are  subject  to 
confirmation  by  the  commission.  Payments  to  injured  em- 
ployees and  their  dependents,  payments  for  medical  and 
hospital  service,  and  for  funeral  expenses,  must  be  the  equal  of 


20         co^r^EXSATIox  ixsuraxce  ilvtes.      [FoI). 

those  provided  in  the  act,  and  the  Industrial  Conunission  is 
empowered  to  adopt  such  ruk^s  and  rejiulations  as  nia>'  hv 
necessiiry  to  secure  proinjit  and  adequate  payments. 

The  Massachusktts  Syste^i. 

In  Massachusetts  the  Insurance  (^onnnissioner  is  empowered 
luider  tlie  com])ensation  act  to  a})])rove  tlie  premium  as  ade- 
quate for  the  risk  assumed,  wliich  virtually  means  that  the  In- 
surance Commissioner  establishes  a  mininumi  premium. 

All  the  various  compajiies  transacting  workmen's  compensa- 
tion insurance  in  Massachusetts  are  represented  in  a  voluntary 
organization,  known  as  the  IMassachusetts  Hating  and  Insi)ec- 
tion  Bureau,  which  classifies  the  various  industries,  collects  and 
collates  information  with  reference  to  such  classifications  and 
the  loss  ratio,  ajid  ascertains  the  amount  of  moncA-  necessary  to 
pay  the  losses. 

Scope  of  Bureau. 

While  rate-making  bureaus  ha\'e  been  established  elsewhere, 
in  some  cases  under  statutory  authority,  and  in  others  by  the 
purely  voluntary  association  of  the  com])anies  themselves,  in 
Massachusetts  none  existed  prior  to  July,  1915.  During  the 
year  1914  the  special  commission  referred  to  elsewhere  in  this 
report  had  reached  certain  conclusions,  one  of  which  was  tliat  it 
was  advisable  that  a  bureau  system  should  be  established  in 
Massachusetts,  and  it  recommended  legislation  to  that  end. 

This  legislation  in  the  form  of  concrete  bills  was  presented  to 
the  General  Court  in  the  session  of  1915,  and  if  enacted  would 
have  established  a  compulsory  compensation  insurance  rate- 
making  bureau  in  this  State,  existing  under  legislative  author- 
ity. They  were  presented  late  in  the  session,  however,  and 
failed  of  passage. 

Shortly  after  the  adjournment  of  the  Legislature,  iji  July,  the 
companies  themselves,  in  consultation  with  and  to  a  very  con- 
siderable extent  following  the  advice  of  the  Insurance  Commis- 
sioner, voluntarily  established  a  Bureau  along  practically  the 
lines  contemplated  by  the  proposed  legislation  aboA'c  referred 
to.  This  Bureau  began  actual  operation  in  September  of  1915. 
The  primary  purpose  of  the  Bureau,  as  stated  before  this  com- 


1917.]  SENATE  — Xo.  370.  21 

mittee  and  as  indicated  by  its  name,  —  the  Massachusetts 
Rating  and  Inspection  Bureau,  —  was  to  put  into  operation  a 
rating  schedule  in  accordance  with  the  degree  of  excellence  in 
each  plant.  In  preparing  its  constitution,  this  purpose  was  ex- 
tended to  include  the  getting  of  all  available  statistics  to  de- 
velop the  manual  rates;  the  making  of  uniform  rules  and  regu- 
lations; and  giving  the  fullest  information  to  employers  with 
respect  to  the  construction  of  rates. 

All  the  companies  doing  business  in  the  State,  including  stock 
and  mutuals,  became  members  of  this  Bureau.  Under  the  con- 
stitution adopted,  the  stock  companies  as  such,  although  much 
more  numerous,  were  given  the  same  voting  power  as  the  mu- 
tual companies,  and  in  the  event  of  a  deadlock  on  any  question 
the  Insurance  Commissioner  was  empowered  to  cast  the 
deciding  vote. 

Development  of  the  Present  Rates. 

Not  long  after  its  formation,  the  Massachusetts  Bureau  par- 
ticipated in  a  conference  in  New  York  with  the  Workmen's  Com- 
pensation Ser\-ice  Bureau,  a  voluntary  association  of  stock 
companies  doing  business  in  various  States,  and  the  Compensa- 
tion Rating  Board  of  New  York,  a  statutory  bureau  of  all 
companies  doing  business  in  that  State.  The  insurance  depart- 
ments of  New  York,  Pennsylvania,  Wisconsin  and  Massachu- 
setts also  participated  in  the  conference.  It  reviewed  each 
manual  classification  and  rate,  as  well  as  the  differentials  for 
each  State.  Its  purpose  was  to  align  upon  a  mathematical 
basis  the  diflferences  existing  in  the  several  States.  On  the 
whole,  the  results  were  satisfactory  to  all  concerned  with  the 
exception  of  a  single  company.  All  agreed  that  the  manual 
classifications  and  the  general  rules  governing  division  of  the 
pay  roll  were  satisfactory.  The  basic  pure  premiums  were 
mainly  satisfactory,  but  certain  changes  were  made  for  Massa- 
chusetts on  recommendation  of  the  Insurance  Commissioner. 

Up  to  this  point  there  was  no  objection  to  adopting  for 
Massachusetts  the  results  of  that  conference.  On  the  question 
of  the  multipUer,  however,  dissension  arose.  The  Employers 
Liability  Assurance  Corporation,  Ltd.,  was  unwilling  to  abide 
bv  the  result  which  had  been  reached  by  the  New  York  Confer- 


22  COMPENSATION  INSURANCE  RATES.         [Feb. 

ence,  and  being  unable  to  impress  its  views  on  the  other  mem- 
bers of  the  Massachusetts  Bureau,  it  eventually  withdrew  there- 
from and  filed  its  own  rates  with  the  Insurance  Commissioner. 
These  rates  were  generally  lower  than  those  compiled  by  the 
Bureau  and  approved  by  the  Insurance  Commissioner.  Inci- 
dentally, the  adequacy  of  these  rates  has  never  been  specifically 
passed  upon  by  the  commissioner. 

The  position  of  the  Employers  Liability  Assurance  Corpora- 
tion, Ltd.,  as  stated  by  its  representative  before  this  committee, 
was  that  the  law  differential,  that  is,  the  amount  which  should 
be  added  to  the  pure  premium  by  reason  of  added  benefits  over 
those  in  the  original  act,  had  been  applied  horizontally  to  all 
classes  of  risks,  and  also  that  the  loadings  were  higher  than  the 
company  should  be  obliged  to  charge. 

This  corporation  writes  about  60  per  cent,  of  its  business  in 
the  textile  and  boot  and  shoe  industries.  The  percentage  al- 
lowed for  the  law  differential  was  40.  The  principal  changes  in 
the  law  have  been  the  increase  of  benefits  from  one-half  to  two- 
thirds  of  average  weekly  wages  and  the  increase  in  the  maxi- 
mum term  of  payments  from  three  hundred  to  five  hundred 
weeks.  In  the  textile  industry,  the  representative  of  this  cor- 
poration pointed  out,  the  average  weekly  wage  is  something  less 
than  $9  per  employee.  Under  the  old  benefits  the  maximum 
payment  would  amount  to  about  $4.50;  under  the  new  benefits 
the  maximum  is  increased  to  about  $6,  an  addition  of  33|  per 
cent.  In  the  boot  and  shoe  industry,  on  the  other  hand,  the 
weekly  pay  per  employee  was  of  such  an  amount  that  under 
either  law  many  of  the  employees  received  the  maximum  of  $10 
per  week,  and  in  the  industry  as  a  whole  the  added  cost  due  to 
increased  benefits  would  not  amount  to  40  per  cent.  It  was  con- 
tended that  these  two  industries,  as  well  as  many  others  where 
the  pay  is  high,  should  not  bear  the  burden  of  an  arbitrarily 
applied  law  differential,  to  the  unfair  advantage  and  benefit  of 
less  extensive  industries. 

Its  objection  to  the  loading  factor  in  the  multiplier  was  based 
upon  the  contention  and  assertion  that  the  company  could 
handle  the  business  more  efficiently  and  economically  than  was 
contemplated  in  that  factor,  and  that  it  should  have  the  privi- 
lege of  doing  so. 


1917.]  SENATE  — No.  370.  23 

The  difference  of  opinion  in  the  matter  of  loading  was  also  a 
very  serious  and  fundamental  controversy,  joined  in  by  all  the 
stock  companies  on  the  one  hand,  and  by  the  mutual  com- 
panies on  the  other,  because  of  inherent  differences  in  their 
methods  of  doing  business.  The  mutual  companies,  by  reason 
of  their  ability  to  return  to  their  policy  holders  increased 
dividends,  viewed  additions  to  the  loading  from  an  angle 
differing  entirely  from  that  of  the  stock  companies  which  pay 
no  dividends  to  their  policy  holders. 

As  a  result  of  this  controversy,  matters  reached  a  focus, 
which  eventually  brought  about  the  appointment  of  this  com- 
mittee. Since  the  committee  was  appointed,  the  constitution  of 
the  Bureau  has  been  changed  so  that  these  two  issues  are  no 
longer  passed  upon  by  the  Bureau;  and  its  functions  are  now 
confined  to  gathering  data  and  information  to  guide  its  members 
in  establishing  manual  classifications  and  determining  for  each 
classification  the  actual  loss  cost.  Since  this  change  in  the 
constitution  most  of  the  controversy  in  the  Bureau  has  been 
eliminated,  and  at  the  present  time  it  is  working  in  a  fairly 
satisfactory  manner. 

The  Bureau  has  undertaken  the  work  of  merit  rating,  this 
rating  being  made  in  the  first  instance  by  the  underwriting 
company  in  accordance  with  schedules  and  plans  approved  by 
the  Insurance  Commissioner,  the  Bureau  having  a  supervisory 
right  to  check  up  the  rating  in  any  particular  instance. 

The  New  York  conference  revised  the  classification  of  in- 
dustries and  established  a  list  of  basic-pure  premiums,  taking 
the  Massachusetts  experience  as  the  basis,  but  combining  with 
it  some  additional  experience  developed  in  Illinois,  Michigan 
and  New  Jersey,  after  so  modifying  the  latter  as  to  allow  for  the 
differences  in  benefits  under  the  several  compensation  acts,  and 
made  the  entire  experience  show  the  cost  of  providing  the 
benefits  under  the  original  Massachusetts  act.  Thus  the  basic- 
pure  premium  is  the  loss  cost  per  $100  of  pay  roll  on  the  scale 
of  benefits  provided  in  the  original  Massachusetts  act.  To  this 
basic-pure  premium  was  applied,  for  the  purpose  of  determining 
the  gross  rate  for  each  State,  a  factor  known  technically  as  a 
multiplier. 


24  CO:\IPEXSATIOX  INSURANCE  RATES.         [Feb. 


The  Multiplier. 

A  brief  explanation  of  the  method  by  which  the  rate  is  made 
should  perhaps  be  inserted  at  this  point.  As  has  been  stated, 
Massachusetts  statistics  and  experience,  while  not  taken  in  toto, 
were  the  foundation,  and  as  that  experience  was  based  at  the 
time  of  the  New  York  conference  upon  the  original  Massa- 
chusetts law,  so  the  Massachusetts  law  as  to  benefits  was 
taken  as  the  starting  point. 

Since  the  starting  point  was  the  actual  loss  cost  under  the 
original  Massachusetts  act,  the  first  step  was  to  find  the 
probable  loss  cost  under  the  act  in  effect  in  the  particular  State 
under  consideration.  Other  items  referred  to  below  also 
entered  into  the  rate  to  be  finally  charged,  known  as  the 
manual  rate,  and  among  these,  of  course,  an  amount  for  ex- 
penses. These  various  items  were  expressed  in  terms  of  per- 
centage, called  factors,  and  the  final  rate  was  arrived  at  by 
multiplying  the  basic-pure  premium  above  referred  to  by  these 
various  factors  expressed  in  one  figure,  which,  as  noted  above, 
is  known  and  referred  to  as  the  multiplier. 

This  multiplier  varies,  as  a  matter  of  course,  in  each  State. 
Here  in  Massachusetts  no  exact  value  has  ever  been  agreed 
upon  for  each  of  these  various  factors.  There  has  been,  how- 
ever, a  final  multiplier  established  by  the  Insurance  Commis- 
sioner as  adequate,  i.e.,  2.35.  Since  Jan.  1,  1917,  when  the 
waiting  period  %vas  reduced  from  fourteen  to  ten  days,  this 
multiplier  has  been  2.45. 

While  the  following  statement  of  the  construction  of  the 
multiplier  is  not  exact,  it  is  as  near  a  consensus  of  opinion  as 
the  committee  has  been  able  to  discover.  There  was  much 
difference  as  to  certain  of  the  percentages  and  considerable 
range  in  the  different  results,  2.35  being  arrived  at  finally  by 
the  Insurance  Commissioner,  without  an  exact  figuring  of  any 
of  the  several  factors,  but  as  being  as  nearly  correct  as  possible. 

The  first  factor  in  the  multiplier,  known  as  the  law  differential, 
has  been  generally  admitted  to  be  40  per  cent.  The  next  is  the 
factor  for  increasing  cost  of  business  and  underestimation  of 
losses.  This  has  varied  from  5  to  10  per  cent,,  and  has  been 
taken  as  6  per  cent.     This  factor  does  not  mean  increasing  ad- 


1917.]  SENATE  — No.  370.  25 

ministration  cost,  but  an  increase  really  in  pure  loss  cost 
because  of  the  fact  that  employees,  since  the  compilation  of 
original  figures,  have  learned  more  about  the  act  and  avail 
themselves  of  it  to  a  greater  extent.  Another  factor  in  the 
nature  of  a  loss  cost  factor,  figured  at  about  2  per  cent.,  is  the 
loss  due  to  occupational  diseases,  for  which  no  payment  was 
originally  allowed  the  employee.  These  various  factors  give  us 
a  multiplier  of  1.5137,  but  there  is  still  to  be  considered  the 
expense  of  conducting  the  business.  This  is  generally  under- 
stood to  have  been  figured  at  37^  per  cent,  (which  was  the 
amount  agreed  upon  in  the  New  York  conference). 

In  short,  the  above  result,  1.5137,  is  62|  per  cent,  of  the 
premium  to  be  charged,  which  would  be  2.42.  As  the  company 
may  be  expected  to  earn  interest  on  the  unexpended  balance  of 
its  paid-in  premiums,  a  factor  of  2  per  cent,  was  allowed  for 
this,  which  on  our  figuring  would  bring  the  multiplier  to  2.37. 
As  stated  above,  it  was  fixed  at  2.35.  There  is  also  a  horizontal 
addition  of  1  cent  on  all  premiums  to  take  care  of  the  catas- 
trophe hazard. 

Pkobable  Futuee  Rates. 

It  is  already  apparent  that  a  continuation  of  the  present 
system  of  paying  workmen's  compensation  benefits,  namely, 
through  insurance  in  stock  and  mutual  companies,  will  mean 
further  increases  in,  the  premium  rates;  in  fact,  the  National 
Workmen's  Compensation  Service  Bureau  and  the  Insurance 
Department  of  the  State  of  New  York  have  announced  that 
rates  must  be  increased,  and  the  participants  in  the  New  York 
conference  of  1915  are  now  engaged  in  a  revision  of  the  basic 
rates  and  multipliers. 

The  committee  has  not  been  able  to  ascertain  what  the 
recommendations  of  this  conference  will  be,  as  its  work  is  still 
far  from  completed.  It  is  therefore  necessary  to  attempt  to 
forecast,  from  figures  furnished  by  the  Insurance  Commissioner, 
what  its  conclusions  are  likely  to  be.  From  such  figures  we 
find  that  the  earned  premiums  of  the  stock  companies  for  the 
year  1915  were  S2,819,041.28,  and  that  the  expenditures  in- 
curred exceed  such  earned  premiums  (taking  all  stock  com- 
panies together)  by  S689,233.80,  a  net  loss  of  24.4  per  cent. 


26  COMPENSATION  INSURANCE  RATES.        [Feb. 

The  Insurance  Commissioner  has  stated  (see  Public  Document 
No.  9,  1916,  Part  II.,  page  xviii)  that  the  rate  increase  which 
became  effective  May  1,  1916,  approximated  on  the  average 
15  per  cent.,  leaving  on  the  basis  of  the  above  figures  a  de- 
ficiency of  9.4  per  cent,  in  the  rates.  The  increase  of  Jan.  1, 
1917,  does  hot  and  was  not  intended  to  take  up  this  deficiency, 
but  merely  to  cover  a  conservative  estimate  of  the  additional 
cost  created  by  the  change  in  waiting  period  which  became 
effective  on  that  date. 

The  increase  in  accidents  reported,  as  shown  by  the  figures  of 
the  Industrial  Accident  Board,  clearly  indicates  an  increase  in 
loss  cost  due  to  the  present  unusual  industrial  activity,  and 
while  these  figures  undoubtedly  relate  to  a  larger  number  of 
employees,  nevertheless  various  data  relative  to  the  increase  in 
number  and  wages  of  employees  indicate  that  the  loss  cost  per 
employee,  or  per  -1100  of  pay  roll,  has  undoubtedly  risen.  It 
would  therefore  seem  that  new  rates  when  promulgated  must 
not  only  take  up  the  deficiency  just  referred  to,  but  must  also 
provide  for  this  increase.  From  various  estimates  that  have 
come  to  the  attention  of  the  committee  it  would  seem  that  an 
allowance  of  from  5  to  10  per  cent,  for  this  would  be  very  con- 
servative, and  it  therefore  seems  certain  that,  unless  the  com- 
panies are  to  incur  a  further  loss  in  the  future,  the  rates  de- 
termined upon  by  the  conference  must  be  from  15  to  20  per 
cent,  higher  than  the  rates  now  in  effect. 

The  committee  understands  that  the  present  rates  of  the 
Massachusetts  Employees  Insurance  Association  are  10  per 
cent,  higher  than  the  stock  company  rates,  and  that  it  has  paid 
dividends  of  30  per  cent.  Certain  of  its  subscribers,  who  re- 
ceived 20  per  cent,  dividends  before  the  readjustment  of  May  1, 
have  since,  we  understand,  been  placed  upon  the  30  per  cent, 
dividend  basis.  These  dividends  have  been  approved  by  the 
Insurance  Commissioner  in  accordance  with  the  provisions  of 
the  compensation  act,  after  examination  of  figures  submitted  to 
him  by  the  association..  The  committee  feels  sure,  therefore, 
that  they  have  been  earned,  and  that  during  the  year  1916  the 
association's  net  cost  has  been  approximately  77  per  cent,  of  the 
gross  rates  now  in  eftect  for  stock  companies.  Most  of  this 
saving  has  been  due   to  lower  administration  costs,   but  un- 


1917.]  SENATE  —  No.  370.  27 

doubtedly  the  accident  prevention  work  of  the  association  has 
affected  the  character  of  its  business. 

At  this  point  it  might  be  proper  to  point  out  that  upon  the 
total  figures  to  Dec.  31,  1915,  as  furnished  by  the  Insurance 
Commissioner,  the  stock  company  expenditures  for  inspection 
and  accident  prevention  were  l.S  per  cent,  of  the  earned  pre- 
miums, as  against  2.3  per  cent,  for  the  association;  but  it 
should  be  borne  in  mind  in  this  connection  that  there  are  in- 
sured with  the  association  many  of  the  largest  employers  in  the 
State,  who,  even  before  the  beginning  of  the  compensation  act, 
had  extensive  safety  organizations.  The  association  was  there- 
fore not  called  upon  to  incur  much  expense  on  behalf  of  these 
employers,  and  its  accident  prevention  expenses  may  reasonably 
be  compared  with  a  volume  of  premiums  much  smaller  than  its 
total  writings.  Probably  the  expenditure  is  to  be  compared 
with  50  or  GO  per  cent,  of  its  total  premium  writings,  which 
would  show  a  proportionate  expenditure  on  this  account  of  from 
4  to  5  per  cent,  of  its  premiums. 

If,  as  is  hereinafter  recommended,  the  association  takes  over 
the  entire  business  of  the  State,  it  may  be  expected  that  its  loss 
cost  will  temporarily  increase,  but  with  the  present  economies  of 
admmistration,  as  compared  with  the  stock  company  adminis- 
tration, and  with  the  further  economies  which  so  large  a  volume 
of  business  would  give  it,  the  committee  has  every  confidence 
that  the  association  should  be  able  to  conduct  the  business  with- 
out further  increase  in  gross  rates,  and  at  a  net  cost  consider- 
ably below  the  present  stock  company  rates. 

The  original  workmen's  compensation  act  for  this  State,  as 
reported  by  the  commission  in  1911,  did  not  permit  insurance 
companies  to  write  workmen's  compensation  insurance.  It  pro- 
vided for  the  establishment  of  the  Massachusetts  Employees  In- 
surance Association,  a  State  insurance  organization  upon  the 
mutual  plan,  which  was  to  write  all  workmen's  compensation 
insurance.  The  expense  ratio  of  that  association,  taken  from 
the  Insurance  Commissioner's  report,  is  14.85  per  cent.,  even 
under  present  conditions,  as  against  the  average  of  40.13  per 
cent,  for  the  stock  companies,  which  would  seem  to  indicate 
that  insurance  can  be  written  at  a  cost  less  than  that  now  re- 
quired by  the  stock  companies. 


28  CO.AIPEXSATIOX  INSURANCE  RATES.         [Feb. 

Your  committee  believes  that  the  solidity  and  perpetuity  of 
the  workmen's  compensation  act  depends  upon  a  proper  solu- 
tion of  the  problem  of  workmen's  compensation  insurance  rates. 
We  have  a  permissive  act  in  Massachusetts,  —  permissive  to 
the  extent  that  an  employer  may  accept  the  compensation  act 
by  insuring  in  an  insurance  company,  or  be  penalized  by  losing 
his  defences  at  common  law.  Laboring  men  are  enthusiastic  for 
the  development  of  the  workmen's  compensation  act,  feeling 
that  it  gives  to  them  the  protection  they  need,  and  takes  them 
out  of  the  turmoil  of  court  action  and  legal  procedure. 

Repeated  increases  in  the  rates  for  workmen's  compensation 
insurance,  tending  toward  extremely  high  if  not  prohibitive 
rates,  may  drive  employers  out  from  under  the  compensation 
act,  and  force  them,  on  the  ground  of  economy,  to  take  their 
chances  at  common  law  with  their  defences  removed,  which  in 
many  cases  will  mean  that  the  injured  employee,  or  his  depend- 
ents if  he  is  killed,  will  be  forced  into  court  in  order  to  obtain 
justice;  it  will  bring  about  a  return  to  the  evils  existing  previ- 
ous to  the  passage  of  the  act,  and  which  the  act  eliminated. 

In  a  statement  to  this  committee  the  chairman  of  the  Indus- 
trial Accident  Board  said :  — 

The  cotton  manufacturers  in  New  Bedford  and  Fall  River  have  figured 
that  they  can  get  out  from  under  the  workmen's  compensation  act;  and 
even  with  the  three  defences  taken  away  thej''  figure  thej''  can  insure  them- 
selves at  42  cents  under  the  employers'  liabiUty  act,  as  against  the  65 
cents  which  they  will  have  to  pay  under  these  new  rates.  That  is  some- 
thing you  will  have  to  face  in  all  industries.  They  take  as  a  basis  for  the 
figure  that  90  per  cent,  of  then-  accidents  wdll  show  no  liability  at  all,  which 
is  probably  true.  If  the  rates  are  to  be  so  high  as  to  drive  anybody  out 
from  under  the  act  it  will  be  a  serious  proposition  for  the  workers  of  Massa- 
chusetts, because  we  have  no  compulsory  compensation  law  as  we  should 
have;  then  no  one  could  go  out,  no  matter  what  the  rates  might  be. 

The  committee  deplores  anything  which  would  in  any  way 
injure  the  workmen's  compensation  act  or  bring  about  these 
results,  and  for  that  reason  we  feel  that  a  decisive  step  should 
be  taken  now  to  minimize  the  cost  of  workmen's  compensation 
insurance. 

The  competition  between  insurance  companies  is  keen.  They 
have  many  agents  and  rival  brokers  canvassing  for  business,  all 


1917.]  SENATE  — No.  370.  29 

of  which  costs  money  and  means  expense.  They  are  continu- 
ally contesting  the  payment  of  benefits  and  employing  legal 
talent  before  the  Industrial  Accident  Board,  in  addition  to 
many  other  expenses  necessitated  by  active  competition,  the 
expense  and  burden  of  which  is  placed  upon  the  employer  first 
and  eventually  upon  the  employee. 

While  the  committee  is  strongly  impressed  with  the  advan- 
tages of  the  Ohio  system,  nevertheless  we  see  great  disadvan- 
tages in  having  the  State  engage  in  the  insurance  business. 
With  a  State  fund,  managed  and  controlled  by  employees  of  the 
State,  appointments  would  not  always  be  made  for  efficiency, 
but  would  sometimes  be  prompted  by  political  expediency,  and 
the  best  results  could  not  possibly  be  obtained. 

It  is  our  belief  that  the  solution  of  the  rate  difficulty  lies  in 
changing  the  law  so  as  to  provide  for  a  single  insurance  carrier, 
operated  by  business  men  insuring  their  workmen  therein,  and 
controlled  by  the  Commonwealth  to  an  extent  sufiicient  to  safe- 
guard the  interests  of  all  concerned.  Thus  insurance  will  be 
carried  at  cost  by  the  industries  of  the  Commonwealth,  and 
managed  by  the  men  most  concerned. 

Cost  to  IMassachusetts  Industry  of  the  Present  Experi- 
ment WITH  THE  Competitive  System. 

Since  your  committee's  recommendation  is  to  do  away  with 
the  competitive  method  of  conducting  the  compensation  busi- 
ness now  in  effect,  and  since,  when  the  original  compensation 
act  was  amended,  one  of  the  stated  purposes  of  the  amendment 
was  to  try  out  competitively  the  different  systems,  it  seems  that 
your  committee  should  present  in  this  connection  a  somewhat 
more  detailed  study  than  indicated  above  of  the  cost  of  the 
present  plan  and  the  savings  to  be  effected  by  your  committee's 
recommendations. 

Since  by  the  removal  of  defences  the  compensation  act  has 
been  made  compulsory  upon  most  employers,  it  is  evident  that 
the  solicitation  expense  of  the  companies  is,  generally  speaking, 
sheer  economic  waste,  since  its  purpose  in  nearly  all  cases  is 
merely  to  influence  employers  either  to  change  to  some  new  in- 
surance carrier,  or  to  remain  with  the  one  with  which  they  may 
happen  to  be  insured.    Figures  furnished  this  committee  by  the 


30  COMPENSATION  INSURANCE  RATES.         [Feb. 

Insurance  Commissioner  show  that  the  stock  companies  allowed 
agents  and  brokers  as  commissions  on  workmen's  compensation 
business,  during  the  several  calendar  years  since  the  compensa- 
tion act  came  into  effect,  the  following  sums :  — 

Amount. 

Year  ending  Dec.  31,  1912, $491,476  78 

Year  ending  Dec.  31,  1913, 507,072  35 

Year  ending  Dec.  31,  1914, 441,912  84 

Year  ending  Dec.  31,  1915, 437,865  38 

$1,878,327  35 

In  addition  to  this  large  sum  the  mutual  companies  were  nec- 
essarily under  some  expense,  both  in  procuring  new  business  and 
retaining  upon  their  books  the  risks  already  insured  with  them. 
This  cost  may  be  conservatively  estimated  at  1|  per  cent,  of  the 
premium,  which  would  be  $60,894.65.  Adding  this  item  to  the 
stock  company  commission  expense  gives  $1,939,222,  or,  in 
round  figures,  $2,000,000.  Nor  does  this  cover  the  entire  solici- 
tation cost,  for  in  the  case  of  the  stock  companies  these  figures 
include  only  actual  commissions,  to  which  must  be  added  the 
cost  of  agency  supervision  in  the  home  office  and  other  costs 
incidental  to  the  system  of  competitive  selection  of  risks. 

The  committee  has  not  seen  fit  to  add  to  these  figures  the 
$441,176.97,  net  profit  to  Dec.  31,  1915,  shown  by  the  Insurance 
Commissioner's  figures,  because,  as  noted  earlier  in  this  report, 
during  the  year  1915  the  net  loss  to  the  stock  companies  was 
$689,233.80,  and  it  therefore  seems  certain  that  during  the  year 
1916  (since  the  new  rates  did  not  come  into  effect  until  May  1, 
and,  as  already  shown,  were  not  sufficient  to  enable  them  to 
break  even)  the  companies'  losses  more  than  offset  their  net 
profit  to  Dec.  31,  1915. 

From  the  above  figures  of  commissions  it  is  evident  that  the 
continuance  of  the  system  during  the  year  1916  added  approxi- 
mately another  half  million  to  the  $2,000,000  cost  above  shown, 
and  if  a  conservative  estimate  is  made  of  the  cost  of  agency 
supervision  in  the  home  office  and  the  other  expenses  referred 
to,  it  will  be  found  that  the  cost  imposed  upon  Massachusetts 
industry  for  the  maintenance  of  this  system  during  these  four 
and  one-half  years  has  been  not  much  less  than  $3,000,000. 


1917.]  SENATE  —  No.  370.  31 

Not  content  with  these  figures,  the  committee  has  endeavored 
to  approach  the  question  from  a  somewhat  different  point  of 
view.  From  the  Insurance  Commissioner's  figures  it  again  ap- 
pears that  the  total  earned  premiums  of  the  stock  companies  to 
Dec.  31,  1915,  were  $11,064,170.86,  and  their  incurred  expenses 
were  $4,338,531.64,  giving  an  expense  ratio  of  39.2  per  cent. 
The  total  earned  premiums  of  the  mutual  companies  for  the 
same  period  were  $4,871,572.14,  and  the  expenses  incurred  were 
$806,689.36,  a  ratio  to  earned  premiums  of  16.6  per  cent.  The 
saving  of  the  mutual  companies  as  compared  with  the  stock 
companies  was  therefore  approximately  23  per  cent.  Twenty- 
three  per  cent,  of  the  $11,064,170.86  premiums  earned  by  the 
stock  companies  would  be  $2,544,759.30,  but  we  have  already 
pointed  out  that  the  expense  of  the  competitive  system  has  im- 
posed upon  the  mutual  companies  a  solicitation  cost  of  some- 
thing more  than  1  per  cent,  of  their  premiums,  and  it  will  be 
apparent  that  in  the  maintenance  of  separate  statistical,  claim 
and  other  administrative  departments  there  is  a  large  duplication 
of  effort. 

Upon  comparing  the  figures  of  the  mutual  companies  with 
those  of  States  where  the  business  is  done  exclusively  by  a 
State  fund,  such  as  Ohio,  it  appears  that  concentration  of  the 
business  in  the  hands  of  one  insurance  carrier  will  make  it 
possible  to  reduce  the  expense  of  administration  to  about  11  or 
12  per  cent.  There  would  therefore  be  a  further  saving  of  about 
5  per  cent,  upon  the  total  premiums  of  the  stock  and  mutual 
companies.  Such  total  premiums  amounted  to  $15,935,743,  and 
5  per  cent,  of  this  sum  is  $796,787.15,  wdiich,  added  to  the 
$2,544,759.30  above,  gives  $3,341,546.45  as  excessive  cost  of  the 
competitive  system  imposed  upon  Massachusetts  industry  to 
Dec.  31,  1915,  with  a  further  increase  for  1916,  suice  such  fig- 
ures for  that  year  have  not  been  brought  into  this  computation. 

Without  attempting  too  great  precision  in  the  matter  it  is 
evident  that  the  cost  to  Massachusetts  industry  for  maintaining 
the  present  competitive  system  of  compensation  insurance  has 
been  between  $2,500,000  and  $3,500,000,  or  about  enough  to 
have  met  all  the  compensation  payments  called  for  by  accidents 
during  the  year  1915. 

In  the  above  figures  no  mention  has  been  made  of  the  amount 


32  COMPENSATION  INSURANCE  RATES.         [Feb. 

to  be  saved  through  the  abolition  of  the  Massachusetts  Rating 
and  Inspection  Bureau,  the  annual  cost  of  which  is  estimated  by 
the  Insurance  Commissioner  to  be  between  $40,000  and  $50,000. 

Since  the  adoption  of  the  workmen's  compensation  act  fully 
one-half  of  the  time  of  the  Insurance  Commissioner  has  been 
consumed  by  compensation  matters.  In  addition  it  has  re- 
quired the  entire  time  of  two  men  in  his  department.  With  the 
adoption  of  the  plan  outlined  by  the  committee  much  less  of  the 
time  of  the  commissioner  would  be  required  for  compensation 
matter. 

Looking  at  the  matter  as  regards  the  future,  and  from  the 
point  of  view  of  the  committee's  recommendations,  it  is  perhaps 
well  to  summarize  by  pointing  out  that  the  present  stock  com- 
pany expense  ratio  is,  on  the  average,  about  40  per  cent,  of  the 
earned  premiums;  that  the  present  mutual  company  expense 
ratio  is,  on  the  average,  about  16  to  17  per  cent,  of  the  earned 
premiums  (although  it  is  fair  to  say  that  at  the  present  time 
the  association  and  the  American  Mutual  Company  have  suc- 
ceeded in  reducing  their  expense  ratios  to  about  15  per  cent.) 
and  that  the  expense  ratio  of  a  single  company  doing  all  the 
business,  as  is  recommended  by  this  committee,  will  be,  on  the 
average,  about  12  per  cent,  of  the  earned  premiums. 

Looking  at  the  figures  in  another  way,  we  may  compare  the 
expenses  incurred  with  the  losses  paid,  comparing  in  the  case  of 
the  stock  companies  40  cents  of  expenses  with  60  cents  of 
losses,  and  in  the  case  of  the  proposed  single  company  12  cents 
of  expenses  with  88  cents  of  losses.  From  this  it  is  evident  that 
under  the  stock  company  system  for  every  dollar  paid  to 
injured  employees  it  requires  66f  cents  to  carry  that  dollar 
through  the  system,  from  the  employer  to  the  employee,  whereas 
under  the  system  proposed  by  this  committee  it  would  cost 
less  than  14  cents  to  carry  that  same  dollar  from  the  employer 
to  the  employee,  and  this  14  cents  would  not  only  cover  the 
expenses  of  insurance  administration,  claim  iuA'estigation  and 
adjustment,  but  would  provide  for  a  substantial  amount  of 
accident  prevention  work. 

The  committee  therefore  recommends  — 

1.  That  all  stock  and  mutual  companies  be  forbidden  to 
transact  workmen's  compensation  insurance,  and  that  a  State- 
controlled  company  be  made  the  sole  carrier  of  such  insurance. 


1917.]  SENATE  —  No.  370.  33 

2.  That  employers  be  permitted,  under  rigid  restrictions,  to 
carry  their  own  insurance. 

3.  That  workmen's  compensation  insurance  be  made  com- 
pulsory for  all  employers  of  five  or  more  persons,  except  em- 
ployers of  domestic  servants  and  farm  laborers. 

The  original  workmen's  compensation  act  provided,  as 
previously  stated,  that  the  Massachusetts  Employees  Insurance 
Association  should  carrj^  all  of  the  compensation  insurance. 
The  Governor  of  the  Commonwealth  appointed  the  first  board 
of  directors,  and  thereafter  the  policy  holders  elected  their  own 
directors.  While  it  is  now  a  private  company  controlled  by  its 
policy  holders,  it  is  popularly  known  as  "The  State  Company," 
and,  until  forced  by  competition,  confined  its  business  ex- 
clusively to  the  writing  of  workmen's  compensation  in  Massa- 
chusetts. It  was  given  authority  to  transact  other  lines  of 
business  and  to  go  outside  of  the  Commonwealth  by  the  Legis- 
lature, but  your  committee  is  advised  that  only  $20,000  of 
premiums  have  been  received  by  this  association  on  business 
other  than  workmen's  compensation.  It  has  a  great  number  of 
policy  holders,  an  efficient  corps  of  officials,  an  established 
surplus  and  good  business  organization.  Your  committee 
recommends  that  this  be  made  in  reality  a  State  company,  by 
the  passage  of  legislation  providing  that  a  majority  of  the 
directorate  shall  at  all  times  be  directors  appointed  by  the 
Governor  of  the  Commonwealth.  The  association  having  been 
given,  by  previous  Legislatures,  all  the  powers  conferred  upon 
any  insurance  company,  should  be  obliged,  when  taken  over  by 
the  Commonwealth,  to  retire  from  all  other  forms  of  insurance 
and  from  all  other  States,  and  to  confine  its  activities  to  the 
carrying  of  workmen's  compensation  insurance  in  Massachusetts 
alone. 

In  addition  to  a  law  which  will  compel  each  employer  to 
provide  for  the  compensation  of  injured  employees  in  accord- 
ance with  the  compensation  act,  an  employer  of  large  numbers 
of  employees,  if  he  is  financially  strong,  should  have  the  option 
of  carrying  his  own  insurance,  and  your  committee  recommends 
that  a  system  of  self-insurance  be  permitted,  under  rigid  in- 
structions, viz. :  — 

The  Insurance  Commissioner  may  grant  a  permit  only  when 
he  is  satisfied  of  the  employer's  financial  responsibility,  such 


34  COMPENSATION  INSURANCE  RATES.         [Feb. 

financial  responsibility  to  be  guaranteed  by  depositing  with  the 
Treasurer  and  Receiver-General  securities  in  such  amount  as 
the  Insurance  Commissioner  may  require. 

The  self-insurer  should  be  required  to  pay  to  the  Common- 
wealth each  year  a  sum  equal  to  1  per  cent,  of  the  premiums 
which  he  would  be  obliged  to  pay  if  his  risk  were  insured  under 
the  act,  this  payment  being  his  contribution  toward  the  expense 
of  administering  the  act. 

The  Industrial  Accident  Board  should  in  all  cases  determine, 
subject  to  the  provisions  of  the  act,  the  amount  to  be  paid  to 
an  injured  employee  or  his  dependents. 

Neglect  or  refusal  on  the  part  of  a  self-insurer  to  pay  com- 
pensation as  determined  by  the  Industrial  Accident  Board 
should  be  reported  forthwith  to  the  Attorney-General,  and  it 
should  be  made  his  duty  to  bring  suit  and  compel  the  payment, 
with  costs  assessed  against  the  insurer,  and  the  permit  should 
be  revoked  by  the  Insurance  Commissioner. 

While  an  employer  may  be  financially  strong  and  well  able  to 
meet  the  expense  of  any  ordinary  accident,  we  appreciate  that 
in  the  event  of  catastrophe  his  securities  deposited  with  the 
Treasurer  and  Receiver-General  might  be  insufficient  to  meet 
the  claims  presented  on  behalf  of  injured  emploj'ees,  and  your 
committee  has  accordingly  inserted  in  its  bill  a  provision  that 
the  self-insurer  shall  insure  his  catastrophe  hazard  in  the  State 
company  under  such  conditions  and  at  such  premium  rate  as 
shall  be  approved  by  the  Insurance  Commissioner.  A  catas- 
trophe should  be  defined  as  any  accident  causing  injuries  to  five 
or  more"  persons,  and  involving  compensation  payments  of 
$20,000  or  more. 

Workmen's    Compensation    Insurance    should    be    made 

Compulsory. 

The  committee  is  convinced  that  if  the  workmen's  compensa- 
tion act  were  made  compulsory,  instead  of  elective,  many  evils 
arising  under  the  present  act  would  be  eliminated,  many  hard- 
ships upon  workmen  would  be  removed,  and  there  would  no 
longer  be  the  constant  threat  that  some  employers,  dissatisfied 
because  of  repeated  advances  in  rates,  or  for  other  causes,  might 


1917.]  SENATE  — No.  370.  35 

further  complicate  the  rate  situation  by  refusing  longer  to  insure 
their  risks. 

From  the  decisions  of  the  Massachusetts  Supreme  Judicial 
Court  it  is  evident  that  any  act  making  workmen's  compensa- 
tion insurance  compulsory  would  probably  be  declared  un- 
constitutional. The  committee  therefore  recommends  an 
amendment  of  the  Constitution  which  is  submitted  herewith, 
and  recommends  further  that  this  amendment  be  agreed  to  by 
the  present  General  Court,  in  order  that  if  again  agreed  to  by 
the  General  Court  of  191S  it  may  be  submitted  to  the  people 
in  that  year. 

Full  power  and  authority  are  hereby  given  and  granted  to  the  general 
court  to  pro\ade  for  a  method  of  compensating  injured  employees  com- 
pulsory upon  all  employers. 

Part   II. 


ACCIDENT  PREVENTION. 

\Miile  certain  and  prompt  payment  of  compensation  to 
injured  workmen  and  their  dependents  has  very  properly  been 
made  the  subject  of  thorough  study,  and  has  been  secured  by 
legislative  enactment,  the  Commonwealth  has  not  yet  given 
adequate  attention  to  the  problem  of  preventing  accidents. 
Statistics  show  that  the  number  of  accidents,  and  consequently 
the  burden  upon  employees  and  society  at  large,  is  steadily  in- 
creasing. It  is  our  opinion  that  the  Legislature  should  no 
longer  delay  the  adoption  of  such  changes  in  the  present  system 
and  administration  as  are  necessary  to  make  them  effective. 

There  can  be  no  dispute  of  the  statement  that  every  accident 
is  simply  so  much  economic  waste,  the  amount  of  which  is 
measured  onlv  bv  the  severitv  of  the  accident.  Moreover,  the 
waste  is  threefold,  in  that  the  employee  and  his  dependents 
must  be  cared  for  while  he  is  incapacitated;  his  earning  power 
is  suspended  for  a  time,  and  in  the  more  severe  cases  is  de- 
creased for  all  time. 


36  COMPENSATION  INSURANCE  RATES.         [Feb. 


What  the  Commonwealth  has  done. 

The  Commonwealth  up  to  the  present  time  appears  to  have 
concerned  itself  chiefly  with  placing  the  burden  of  this  waste. 
Originally  it  was  upon  the  employee;  then,  through  the  em- 
ployers' liability  act,  he  was  given  an  opportunity  to  transfer  a 
portion  of  it  to  his  employer;  and  now,  under  the  workmen's 
compensation  law,  it  is  distributed  between  the  injured  work- 
man and  society  at  large,  the  workman  bearing  at  least  one- 
third  of  the  burden. 

It  should  not  be  assumed,  however,  that  the  Legislature  has 
been  entirely  unmindful  of  the  necessity  for  preventing  acci- 
dents. From  time  to  time,  prior  to  1912,  it  had  imposed  upon 
the  District  Police  and  the  State  Board  of  Health  the  duty  of 
inspecting  such  industrial  establishments  and  conditions  as  fell 
naturally  within  their  respective  fields  of  action.  By  chapter 
726  of  the  Acts  of  1912  it  created  a  State  Board  of  Labor  and 
Industries,  and  by  section  5  of  that  act  transferred  to  that 
Board  "all  powers  and  duties  with  reference  to  the  enforce- 
ment of  laws  relating  to  labor  and  the  employment  thereof,  the 
inspection  and  licensing  of  buildings  or  parts  of  buildings  used 
for  industrial  purposes,  the  inspection  and  licensing  of  workers 
therein  and  of  all  other  industrial  employees  within  the  com- 
monwealth, the  enforcement  of  laws  relating  to  the  employ- 
ment of  women  and  minors,  and  the  institution  of  proceedings 
in  prosecution  of  violation  of  any  of  the  said  laws."  Thus  the 
State  Board  of  Labor  and  Industries  was  given  full  power  to 
enforce  such  measures  for  preventing  accidents  as  had  been 
made  the  subject  of  legislative  enactment. 

But  in  the  following  year,  and  before  the  State  Board  of  La- 
bor and  Industries  had  been  appointed,  the  Legislature  enacted 
chapter  813  of  the  Acts  of  1913,  entitled  "An  Act  relative  to 
industrial  accidents  and  occupational  diseases."  The  essential 
sections  of  that  act  are:  — 

Section  1.  The  state  board  of  labor  and  industries  and  the  industrial 
accident  board,  sitting  jointly,  shall  investigate  from  time  to  time  em- 
ployments and  places  of  employment  within  the  commonwealth,  and 
determine  what  suitable  safety  devices  or  other  reasonable  means  or 
requirements  for  the  prevention  of  accidents  shall  be  adopted  or  followed 


1917.]  SENATE  — No.  370.  37 

in  any  or  all  such  employments  or  places  of  employment;  and  shall  also 
determine  what  suitable  devices  or  other  reasonable  means  or  require- 
ments for  the  prevention  of  industrial  or  occupational  diseases  shall  be 
adopted  or  followed  in  any  or  all  such  employments,  or  places  of  employ- 
ment; and  shall  make  reasonable  rules,  regulations  and  orders  for  the 
prevention  of  accidents  and  the  prevention  of  industrial  or  occupational 
diseases  in  such  employment  or  places  of  employment.  Such  rules,  regu- 
lations and  orders  may  apply  to  both  employer  and  employee. 

Section  4.  The  joint  board  shall  make  such  general  arrangement 
between  the  two  boards  as  will  prevent  duplication  of  effort,  but  the 
inspection  and  investigation  carried  on  by  the  state  board  of  labor  and 
industries  shall  be  a  systematic  inspection  and  investigation  of  all  places 
of  employment  and  the  conditions  of  safety  and  health  pertaining  thereto, 
and  the  inspection  and  investigation  carried  on  by  the  industrial  accident 
board  shall  be  that  relating  to  causes  of  injuries  for  which  compensation 
is  claimed. 

Section  13.  Vv^hoever  violates  any  reasonable  rule,  regulation,  order 
or  requirement  made  by  the  joint  board  under  authority  hereof  shall  be 
punished  by  a  fine  of  not  more  than  one  hundred  dollars  for  each  offence. 

Under  this  statute  the  Joint  Board  had  all  necessary  power  to 
make  rules  and  regulations  for  the  prevention  of  accidents,  the 
only  limitation  imposed  being  that  its  rules  and  regulations 
must  be  reasonable.  Yet,  after  the  Joint  Board  had  possessed 
these  broad  powers  for  nearly  three  years,  His  Excellency  the 
Governor  sent  to  the  Legislature  the  message  of  April  21,  1916, 
quoted  above,  and  in  which  he  said:  — 

The  operations  of  this  Joint  Board  have  not  proved  effective  in  any 
material  degree.  .  .  .  The  meeting  of  the  Joint  Board  is  held  only  once 
in  a  fortnight,  and  the  statistics  that  have  been  collected  relating  to 
accidents  and  to  occupational  diseases  have  not  even  been  digested  and 
intelligent  deductions  drawn  from  them. 


*e^ 


His  Excellency  recommended  that  the  powers  of  the  Joint 
Board  be  transferred  to  the  Industrial  Accident  Board,  and  this 
recommendation  was  embodied  in  a  bill,  but  the  Legislature 
enacted  a  statute  transferring  the  powers  to  the  State  Board  of 
Labor  and  Industries. 

By  the  Acts  of  1911,  chapter  751,  Part  III.,  section  18,  it  is 
provided  that  "Every  employer  shall  hereafter  keep  a  record  of 
all  injuries,  fatal  or  otherwise,  received  by  his  employees  in  the 
course  of  their  employment.  Within  forty-eight  hours,  not 
counting  Sundays  and  legal  holidays,  after  the  occurrence  of  an 


38  COMPENSATION  INSURANCE  RATES.         [Feb. 

accident  resulting  in  personal  injury,  a  report  thereof  shall  be 
"made  in  writing  to  the  industrial  accident  board  on  blanks  to  be 
procured  from  the  board  for  that  purpose."  Failure  or  neglect 
to  jBle  such  reports  is  made  punishable  by  a  fine  of  not  more 
than  $50  for  each  offence. 

These  reports  constitute  an  essential  feature  of  the  adminis- 
tration of  the  compensation  act;  without  them  the  Industrial 
Accident  Board  would  be  unable  to  secure  for  every  incapaci- 
tated employee  that  certain  and  prompt  compensation  to  which, 
under  the  provisions  of  the  act,  he  is  entitled. 

Apparently  recognizing  this  fact,  but  believing  also  that  the 
reports  contained  much  matter  which  should  be  useful  to  the 
tribunal  having  charge  of  the  State  inspectors  whose  duties  in- 
clude the  safeguarding  of  machinery,  etc.,  with  a  view  to  acci- 
dent prevention,  the  Legislature  of  the  following  year,  in 
creating  the  State  Board  of  Labor  and  Industries,  provided 
that  — 

Copies  of  all  reports  concerning  injuries  received  by  employees,  which 
employers  are  required  to  file  with  the  industrial  accident  board  under 
the  provisions  of  section  eighteen  of  Part  III.  of  chapter  seven  hundred 
and  fifty-one  of  the  acts  of  the  year  nineteen  hundred  and  eleven,  shall  be 
filed  with  the  state  board  of  labor  and  industries.  Any  employer  who 
refuses  or  neglects  to  make  the  report  required  by  this  section  shall  be 
punished  by  a  fine  of  not  more  than  fifty  dollars  for  each  offence.  (St. 
1912,  ch.  726,  sect.  13.) 

Even  before  the  statute  above  quoted  had  become  effective, 
however,  the  Legislature  was  petitioned  to  remove  the  require- 
ment of  a  dual  report,  on  the  ground  that  it  imposed  upon  em- 
ployers unnecessary  hardship  and  expense.  As  a  result  of  this 
representation,  the  Legislature  of  1913  repealed  section  13  of 
chapter  726  of  the  Acts  of  1912,  and  re-enacted  the  provisions  of 
section  18  of  Part  III.  of  chapter  751  of  the  Acts  of  1911,  with 
certain  additions,  one  of  which  was:  — 

Copies  of  all  reports  of  injuries  filed  by  employers  with  the  industrial 
accident  board,  and  all  statistics  and  data  compiled  therefrom,  shall  be 
kept  available  by  the  said  board,  and  shall  be  furnished  on  request  to 
the  state  board  of  labor  and  industries  for  its  own  use.  (See  St.  1913, 
ch.  746.) 


1917.]  SENATE  — No.  370.  39 

This  statute  became  effective  July  1,  1913,  but  apparently 
its  existence  was  unknown  to  the  State  Board  of  Labor  and 
Industries.  A  representative  of  that  Board  stated  to  this 
committee:  — • 

There  is  a  little  bit  of  improvement  that  might  be  made,  I  think,  if 
the  Accident  Board  were  required  to  report  their  accidents  to  us,  and  not 
have  us  stumble  on  them  as  we  go  along.  The  work  of  the  Joint  Board 
has  been  to  investigate  after  the  accident  happened;  the  work  of  the  State 
Board  of  Labor  and  Industries  is  to  prevent  the  accident.  It  appeals  to 
me,  from  the  standpoint  of  a  business  man,  that  if  we  had  a  copy  of  every 
accident  which  Brother  Donahue  has  we  could  then  put  an  inspector 
upon  that  work  instead  of  waiting  for  our  force  to  stumble  upon  it.  .  .  . 
A  copy  of  each  accident  report  will  save  the  State  a  great  many  lives  and 
a  great  many  dollars. 

Since  the  above  statement  was  made  representatives  of  the 
Boards  have  been  engaged  in  preparing  a  plan  by  which  acci- 
dent reports  will  be  available  at  all  times  to  either  Board,  but 
at  the  time  of  writing  this  report  no  such  plan  has  been  put 
into  effect. 

What  the  Insurance  Companies  have  done. 

During  the  first  six  months  (July  1  to  Dec.  31,  1912)  of  the 
operation  of  the  workmen's  compensation  act,  when  23  com- 
panies were  writing  policies  in  this  Commonwealth,  18  of  these 
companies  expended  a  total  of  S31,168.90  for  inspection  and 
accident  prevention. 

In  1913,  with  24  companies  writing  policies,  21  expended 
$96,950.25  for  the  same  purposes.  In  1914,  24  of  the  29  com- 
panies writing  policies  expended  the  sum  of  $83,671.22;  while 
in  1915  the  expenditures  for  these  purposes  totaled  $72,180.93, 
this  being  the  sum  of  the  payments  made  by  24  of  the  29  com- 
panies writing  policies.     Figures  for  1916  are  not  yet  available. 

Thus  it  will  be  seen  that  during  the  first  three  and  a  half 
years  of  the  operation  of  the  act  a  grand  total  of  $283,981.30 
was  expended  by  the  private  companies  for  inspection  and  acci- 
dent prevention.  Of  this  sum,  $196,663.95  was  contributed  by 
20  stock  companies,  and  $87,317.35  by  4  mutual  companies. 


40  COMPENSATION  INSURANCE  RATES.         [Feb. 


What  Employers  have  done. 

Statistics  are  nowhere  available  from  which  to  form  even  an 
approximate  idea  as  to  expenditures  by  employers  in  their  ef- 
forts to  reduce  accidents.  It  should  be  noted,  however,  that  one 
of  the  larger  stock  companies  reports  to  the  Industrial  Accident 
Board  that  it  makes  an  average  of  45,000  inspections  each  year, 
as  a  result  of  which  its  inspectors  issue  100,000  orders;  of  these, 
25  per  cent,  are  deemed  "essential,"  and  75  per  cent,  "desir- 
able." Of  the  former,  100  per  cent,  are  complied  with,  while  it 
has  been  found  that  fully  75  per  cent,  of  the  "desirable"  orders 
are  adopted. 

It  is  therefore  apparent  that  employers  generally  have  shown 
a  most  commendable  desire  to  effect  in  their  plants  such  changes 
as  in  the  opinion  of  inspectors  would  assist  in  reducing  accident 
frequency. 

In  view  of  these  facts  —  viz.,  that  the  Legislature  has  pro- 
vided abundant  authority  for  the  establishment  of  any  regula- 
tions which  may  assist  in  accident  prevention;  that  insurance 
companies  have  exj^ended  nearly  $300,000  of  employers'  premi- 
ums in  their  efforts  to  lessen  the  number  of  accidents;  and  that 
employers  appear  to  have  complied  with  practically  all  their 
suggestions  —  it  is  somewhat  disconcerting  to  learn  from  the 
statistics  of  the  Industrial  Accident  Board  that  the  number  of 
injuries  sustained  by  employees  in  this  State  has  increased  in 
the  four  and  a  half  years  during  which  the  compensation  act 
has  been  in  operation.  For  the  year  beginning  July  1,  1912,  and 
ending  June  30,  1913,  the  number  of  accidents  reported  to  the 
Board  was  90,168;  during  the  six  months  ending  Dec.  31  last, 
no  less  than  84,603  accident  reports  were  filed  with  the  Board. 

It  is  our  opinion  that  accident  prevention  would  be  promoted 
by  the  application  of  experience  merit  rating  to  every  insured 
risk,  as  explained  later  in  this  report,  and  that  the  administra- 
tion of  the  compensation  law,  the  making  of  rules  and  regula- 
tions for  accident  prevention  and  the  enforcement  of  the  same, 
together  with  the  enforcement  of  all  general  laws  relating  to 
labor,  should  be  co-ordinated  within  one  industrial  department, 
as  is  done  with  economy  and  marked  efficiency  in  other  States. 

As  we  have  previously  stated,  the  Industrial  Accident  Board 


1917.]  SENATE  —  No.  370.  41 

receives  a  detailed  report  of  every  accident  occurring  in  in- 
dustry in  Massachusetts;  its  members  are  listening  each  day  to 
recitals  by  injured  workmen  and  others  of  the  causes  of  serious 
accidents.  They  acquire  intimate  knowledge,  in  two  ways,  of 
the  causes  of  accidents;  and,  of  even  more  importance,  the 
necessity  of  preventing  accidents  is  impressed  upon  them 
through  coming  in  personal  contact  with  the  victims  of  acci- 
dents who,  in  many  cases,  are  maimed  for  life. 

These  men,  in  our  judgment,  should  make  the  rules  and  regu- 
lations for  preventing  accidents,  and  should  be  in  close  touch 
with  the  problems  involved  in  their  enforcement.  The  labor 
laws  generally  were  conceived  with  the  intention  of  improving 
places  of  employment  and  of  preventing  accidents  and  industrial 
diseases,  but  it  is  apparent  that  division  of  authority  and  lack 
of  adequate  supervision  of  inspection  work  are  not  conducive 
to  this  result. 

With  a  co-ordinated  department,  the  educational  work  which 
at  present  is  entirely  lacking  could  be  furnished,  and  the  in- 
spection work  should  be  greatly  improved.  Inspectors  would  be 
given  far  better  instruction  in  effective  methods  of  preventing 
accidents  by  men  trained  in  the  subject,  through  constant 
association  with  the  causes  of  accidents  and  their  victims,  and 
they  should  be  required  to  transmit  the  information  given  them 
to  employers  and  employees  in  the  places  visited;  establish- 
ments having  an  undue  accident  frequency  would  be  called  to 
their  attention  and  made  the  subject  of  special  study;  and  it 
would  be  possible  (and  highly  desirable)  to  check  the  work  of 
each  inspector  by  ascertaining  the  accidents  subsequently 
occurring  in  establishments  which  he  has  passed  as  conforming 
to  the  required  standard. 

In  Ohio  the  Industrial  Commission  administers  the  work- 
men's compensation  law,  collects  the  premiums  and  pays  the 
benefits  from  the  State  fund.  It  has  charge  of  the  enforcement 
of  all  laws  relating  to  labor,  examines  applicants  for  licenses  to 
operate  steam  boilers,  inspects  steam  boilers,  as  well  as  factories 
and  buildings,  superintends  the  free  employment  offices,  and  has 
the  powers  and  duties  formerly  lodged  in  the  Board  of  Concilia- 
tion and  Arbitration.  Our  study  of  the  Ohio  system  disclosed 
no  dissatisfaction  with  its  operations,  employers  and  employees 


42  COMPENSATION  INSURANCE  RATES.         [Feb. 

generally   expressing   entire   approval.      In   our   judgment   this 
system  should  be  adopted  in  Massachusetts. 

The  committee  recommends  the  establishment  of  an  industrial 
commission  to  include  the  present  Industrial  Accident  Board,  to 
which  should  be  given  all  the  powers  and  duties  now  exercised 
by  it  and  by  the  State  Board  of  Labor  and  Industries,  and 
there  should  be  transferred  to  it  the  supervision  of  free  employ- 
ment offices,  now  entrusted  to  the  director  of  the  Bureau  of 
Statistics;  the  powers  and  duties  of  the  State  Board  of  Con- 
ciliation and  Arbitration;  the  powers  and  duties  of  the  District 
Police  with  respect  to  the  inspection  of  factories  and  buildings, 
and  of  steam  boilers;  and  the  powers  and  duties  of  the  Mini- 
mum Wage  Commission.  The  establishment  of  such  a  com- 
mission would  result  in  a  considerable  saving  to  the  Common- 
wealth in  the  matter  of  salaries  alone.  The  salaries  now  paid 
to  members  of  the  several  boards  and  commissions  which  it  is 
proposed  to  consolidate,  and  to  the  deputies  of  the  District 
Police  in  charge  of  the  inspection  of  factories  and  public  build- 
ings, and  of  steam  boilers,  aggregate  $42,800.  In  Ohio  the  three 
members  of  the  Industrial  Commission  receive  salaries  totaling 
$12,500.  Your  committee  has  not  prepared  drafts  of  bills  for 
the  consolidation  of  these  commissions,  believing  that  the  de- 
tails of  such  consolidations  should  be  worked  out  by  the  joint 
committee  of  the  Senate  and  House  which  is  now  considering 
the  consolidation  of  commissions. 

"Experience"    v.    "Schedule"    Rating    as    a    Means    of 

preventing  accidents. 

It  is  agreed  by  every  one  that  the  employer  carrying  on  his 
business  in  a  modern  factory,  well  lighted,  equipped  with  mod- 
ern machinery  and  all  approved  safeguards,  and  who,  by  reason 
of  these  factors  and  constant  instruction  of  employees  in  the 
perils  of  carelessness,  has  a  comparatively  low  accident  cost, 
should  have  a  premium  rate  lower  than  is  required  of  another 
employer,  whose  experience  has  shown  that  his  establishment  is 
lacking  in  these  features.  The  one  should  have  a  premium  rate 
lower  than  the  average  rate;  the  other  should  pay  a  premium 
rate  higher  than  the  average  rate. 


1917.]  SENATE  — Xo.  370.  43 

The  premium  rate  for  each  of  these  employers  should  be 
adapted  from  the  manual  rate  by  methods  scientifically  and  ac- 
curately devised.    Two  systems  are  in  vogue. 

Under  "schedule"  rating  the  rate  is  determined  in  advance 
upon  the  basis  of  probable  hazard  due  to  the  installation  or  lack 
of  safety  devices,  safety  organization,  etc. 

Under  "experience"  rating  the  rate  is  based  upon  the  actual 
accident  frequency  developed  by  the  establishment. 

Under  the  schedule  rating  plan,  which  has  been  in  operation 
in  New  York  and  certain  other  States  for  some  time,  an  em- 
ployer who  feels  that  he  has  safeguarded  his  machinery  and  in- 
stalled other  safety  devices  to  an  extent  which  entitles  him  to  a 
rate  lower  than  the  annual  rate  for  his  classification  applies  to 
the  company  in  which  he  is  insured  for  a  rating  of  his  risk.  The 
company  details  an  inspector  to  make  a  thorough  examination  of 
the  employer's  plant.  On  a  blank  provided  for  the  purpose  a  speci- 
fied credit  is  given  for  each  guarded  danger  point,  whether  it  be 
on  or  about  a  machine,  or  an  opening  in  the  floor;  in  like  man- 
ner a  specified  debit  is  charged  for  each  machine,  opening  or 
other  danger  point  which  has  not  been  brought  up  to  standard. 
When  the  inspection  is  completed  the  blank  is  forwarded  to  the 
Inspection  and  Rating  Bureau,  which  balances  the  debits  and 
credits  and  applies  the  difference  to  the  manual  rate.  The  re- 
sult becomes  the  premium  rate  for  the  employer. 

Where  the  experience  rating  plan  is  in  vogue,  as  in  Ohio,  the 
administrative  authority,  at  the  end  of  each  six  months,  deter- 
mines for  each  establishment  coming  within  the  provisions  of 
the  workmen's  compensation  law  its  proper  proportion  of  the 
accident  cost  of  its  classifications.  If  its  actual  accident  cost  has 
been  more  than  its  proper  proportion,  then  a  certain  percentage 
of  the  excess  is  added  to  the  premium  for  the  ensuing  six 
months;  and  a  similar  reduction  in  the  premium  is  made  if  the 
actual  cost  has  been  less  than  the  proper  proportion. 

After  careful  study  of  both  systems  this  committee  is  strongly 
of  the  opinion  that  the  experience  rating  method  is  (1)  far  more 
accurate  and  gives  a  larger  measure  of  justice  as  between  em- 
ployers; and  (2)  will  have  a  much  greater  tendency  toward  the 
prevention  of  accidents. 


44  COMPENSATION  INSURANCE  RATES.         [Feb. 


Accuracy. 

The  schedule  rating  system  is  one  under  which  the  premium 
rate  is  determined  in  advance,  the  manual  rate  being  graduated 
in  accordance  with  the  potentiality,  rather  than  the  actuality 
of  accident.  Credit  is  given,  not  for  actual  avoidance  of  acci- 
dent, but  for  installation  of  devices,  etc.,  which  may  prevent  ac- 
cident; and  debits  are  charged,  not  for  the  accidents  which 
actually  occur,  but  for  the  presence  of  conditions  which  may 
result  in  accident. 

If  the  manual  rate  is  scientifically  and  correctly  computed,  it 
is  essential  that  credits  and  debits,  applied  to  that  manual  rate, 
should  exactly  balance.  Excess  of  either  over  the  other  must 
result  in  vitiating  the  manual  rate. 

And  that  is  exactly  what  has  happened  under  the  schedule 
rating  system  in  New  York.  During  the  first  year  of  its  appli- 
cation in  that  State  the  credits  given  so  outweighed  the  debits 
charged  that  the  total  premiums  were  reduced  approximately 
$800,000  from  what  would  have  been  collected  had  the  manual 
rate  been  charged  on  every  policy. 

It  is  difficult  to  conceive  that  such  a  system  can  even  ap- 
proach accuracy.  In  order  to  do  so  it  is  imperative  that  there 
be  universal  and  uniform  inspection,  with  schedule  rating  ap- 
plied to  every  risk.  But  even  when  that  is  accomplished,  the 
credits  and  debits  will  not  balance  unless  the  standard  used  for 
comparison  is  the  exact  average  of  conditions  throughout  the 
Commonwealth.  Clearly,  such  a  standard  could  not  be  estab- 
lished, nor  would  it  be  desirable.  In  safety  devices  there 
should  be  no  standard  except  perfection. 

Where  the  experience  rating  plan  is  in  operation,  the  pre- 
mium rate  of  the  individual  employer  is  raised  or  lowered  in 
accordance  with,  and  in  exact  proportion  to,  the  determined 
cost  of  accidents  actually  occurring  in  his  own  establishment. 
The  accident  cost  for  each  classification  is  accurately  deter- 
mined and  proportioned  on  a  pay-roll  basis  among  the  estab- 
lishments making  up  that  classification.  The  employer  whose 
plant  has  an  accident  cost  lower  than  the  average  is  allowed  on 
his  next  premium  a  certain  percentage  of  the  difference.  But 
always  there  is  another  plant,  or  perhaps  more  than  one,  with 


1917.]  SENATE  —  No.  370.  45 

an  accident  cost  higher  than  the  average,  and  the  next  premium 
charged  to  the  owner  or  owners  is  increased  by  the  same  per- 
centage. By  this  method  all  reductions  from  the  manual  rates 
are  offset  by  corresponding  increases,  and  the  gross  premiums 
collected  are  the  same  as  though  the  manual  rate  had  been 
collected  on  every  risk. 

In  other  words,  the  experience  rating  plan  cannot  be  in- 
accurate, while  the  schedule  rating  plan  can  hardly  be  other- 
wise. 

Effect  on  Accident  Prevention. 

If  the  schedule  rating  plan  be  adopted  exclusively,  an  em- 
ployer, in  order  to  obtain  a  reduction  in  his  premium  rate,  need 
do  nothing  except  install  such  safety  devices  as  happen  to  be 
obtainable.  When  he  has  provided  them  he  is  entitled  to  a 
lower  rate,  regardless  of  whether  they  actually  reduce  accident 
frequency  and  cost.  Under  these  conditions  a  busy  manu- 
facturer can  hardly  be  expected  to  devote  any  considerable 
portion  of  his  time  to  the  study  of  methods  of  reducing  the 
number  of  accidents. 

But  experts  agree  that  safety  devices  are  not  the  leading 
factor  in  accident  prevention;  they  may  be  provided  by  the 
employer,  but  discarded  by  the  employee,  —  a  condition  which 
is  dealt  with  later  in  this  report.  Yet  in  a  factory  where  this 
proved  to  be  the  practice  the  employer,  under  the  schedule 
rating  system,  would  get  the  specified  credit,  although  the 
hazard  was  not  at  all  reduced. 

The  real  effective  force  in  accident  prevention  is  education, 
applied  to  both  employer  and  employee.  This  factor  is  given 
slight  consideration  in  the  schedule  rating  system,  the  only 
allowance  made  for  it  being  the  award  of  a  credit  for  the 
establishment  and  maintenance  of  a  safety  organization  within 
a  plant. 

With  the  experience  rating  plan,  however,  there  is  constantly 
before  the  employer  the  thought  that  each  accident  lessens  the 
reduction  which  he  may  hope  to  obtain  in  his  next  premium, 
and,  if  too  often  repeated,  wipes  away  all  chance  of  a  reduction 
and  causes  instead  an  increase. 

In  other  words,  each  accident  means  to  him  a  direct  financial 
loss;   naturally,  he  will  strive  constantly  to  avert  accidents.    He 


46  COMPENSATION  INSURANCE  RATES.         [Feb. 

will  provide  safety  devices,  and  having  bought  them  he  will 
insist  that  they  be  used,  because  his  ensuing  premium  must  be 
reduced  to  compensate  him  for  his  outlay.  He  will  take  such 
steps  as  may  be  necessary  to  keep  before  his  employee  at  all 
times  the  thought  that  constant  watchfulness  is  the  price  of 
freedom  from  injury,  with  its  resultant  pain  and  partial  loss  of 
wages.  He  will  do  all  that  would  be  done  if  the  schedule  rating 
system  were  applied,  and  will  then  go  several  steps  further. 
Such  humanitarian  instincts  as  he  may  have  will  be  supple- 
mented by  compelling  financial  considerations,  and  in  the  light 
of  statistics  quoted  elsewhere  in  this  report  it  appears  that  such 
a  coalition  of  forces  is  necessary  if  results  are  to  be  obtained. 

While  much  of  the  phraseology,  many  of  the  statements,  and 
some  of  the  conclusions  contained  in  the  foregoing  report  do  not 
fairly  represent  the  individual  views  or  meet  with  the  un- 
qualified approbation  of  some  of  the  members  of  the  committee 
who  subscribe  to  it,  the  undersigned  concur  in  the  general  re- 
sults and  recommendations  as  tending  to  better  existing  con- 
ditions. 

Respectfully  submitted, 

JAMES  F.  CAVANAGH. 
JOHN   F.  SHEEHAN. 
WM.  W.  KENNARD. 
ESSEX  S.  ABBOTT. 
ROBERT  T.  KENT. 
WILLIAM  H.  SULLIVAN. 
CHARLES  F.  GARRITY. 


1917.]  SENATE  — No.  370.  47 


Appendix  to  Majority  Report. 


AMENDMENT  TO  PRESENT  LEGISLATION. 

Chapter  751  of  the  Acts  of  1911,  as  amended  by  Chapters  172  and  571 
OF  THE  Acts  of  1912,  is  further  amended  by  adding  after  Part  V  of 
said  Chapter,  Part  VI. 

Part   VI. 

Relative  to  the  Payment  of  Compensation  to  Employees  for 
Personal  Injuries  received  in  the  Course  of  their  Employ- 
ment. 

1  Section  1.     Any    employer   upon   recehdng   from    the   insurance 

2  commissioner  a  permit  as  provided  in  section  two  of  Part  VI,  shall 

3  be  a  subscriber  within  the  terms  of  Part  V  of  this  act,  and  shall  be- 

4  come  Uable  to  make  all  payments  provided  for  in  Part  II  and  acts 

5  in  amendment  thereof  and  in  addition  thereto,  and  shall  be  subject 

6  to  the  provisions  of  Parts  I,  II,  III,  and  V  of  said  chapter,  and  acts 

7  in  amendment  thereof  and  in  addition  thereto,  and  of  sections  twenty, 

8  twenty-one,  and  twenty-two  of  Part  IV  of  said  chapter  and  acts  in 

9  amendment  thereof  and  in  addition  thereto. 

1  Section  2.     The   insurance   commissioner  may  issue  to   an   em- 

2  ployer,  under  such  terms  and  conditions  as  the  insurance  commis- 

3  sioner  may  determine,  a  permit  authorizing  said  employer  to  pay  the 

4  benefits  as  pro\dded  by  chapter  seven  hundred  and  fifty-one  of  the 

5  acts  of  the  year  nineteen  hundred  and  eleven,  and  "ah  acts  in  amend- 

6  ment  thereof  and  in  addition  thereto,  and  upon  the  issuance  of  said 

7  pei-mit  such  employer  shall  be  regarded  as  a  subscriber  within  the 

8  terms  of  said  chapter  so  far  as  apphcable  within  the  meaning  of  said 

9  chapter. 

10  Before  issuing  such  permit  the  insurance  commissioner  shall  satisfy 

11  himself  as  to  the  financial  responsibility  of  the  employer  and  the 

12  employer's  abiUty  to  carry  out  the  provisions  of  chapter  seven  hundred 

13  and  fifty-one  of  the  acts  of  the  year  nineteen  hundred  and  eleven,  and 

14  acts  in  amendment  thereof  and  in  addition  thereto,  in  the  spirit  of  the 

15  act  as  defined  by  the  insurance  commissioner.     The  insurance  com- 

16  missioner  shall,  however,  require  that  such  emploj-er: 

17  (a)  File  with  the  treasurer  and  receiver  general  of  the  common- 

18  wealth  securities  in  an  amount  not  less  than  fifty  thousand  dollars, 


48  COMPENSATION  INSURANCE  RATES.        [Feb. 

19  and  for  such  additional  amount  as  the  insurance  commissioner  from 

20  time  to  time  deems  necessary,  having  due  regard  for  the  character  of 

21  the  employer's  business,  the  number  of  employees  and  the  wages 

22  paid  to  employees.    Such  securities  shall  be  deposited  with  the  treas- 

23  urer  and  receiver  general  of  the  commonwealth  under  a  trust  agree- 

24  ment,  in  such  form  as  the  insurance  commissioner  may  determine, 

25  appointing  the  treasurer  and  receiver  general  trustee  of  such  securities, 

26  with  the  authority  to  liquidate  for  the  purpose  of  paying  the  obliga- 

27  tions  of  said  employer  under  the  workmen's  compensation  act. 

28  (6)  Such  employer  shall  insure  with  the  association  his  catastrophe 

29  hazard,  so-called,  and  for  the  purpose  of  this  act  a  catastrophe  hazard 

30  shall  be  deemed  to  be  any  accident  causing  injuries  to  five  or  more 

31  persons  and  involving  compensation  payments  of  twenty  thousand 

32  dollars  or  more.    The  rate  of  premium  for  such  risk  assumed  by  the 

33  association  shall  be  fixed  by  the  insurance  commissioner. 

1  Section  3.  -For  the  purpose  of  defrajdng  the  expenses  of  ad- 

2  ministering  the  workmen's  compensation  act,  the  said  employer  shall 

3  file  with  the  insurance  commissioner  an  estimate  of  the  pay  roll  of  his 

4  employees  for  the  ensuing  twelve  months,  and  the  insurance  com- 

5  missioner  shall  apply  to  this  pay  roll  the  premium  rate  which  he  has 

6  approved  for  a  similar  business  and  classification  in  the  association, 

7  and  the  said  employer  shall  pay  to  the  treasurer  and  receiver  general 

8  of  the  commonwealth  one  per  cent  of  the  premium  so  ascertained  by 

9  the  insurance   commissioner,   and  at  the  expiration  of  the  twelve 

10  months  for  which  the  pay  roll  is  so  estimated  he  shall  make  a  return 

11  of  any  additional  pay  roll  for  the  period  so  covered,  to  which  addi- 

12  tional  pay  roll  the  insurance  commissioner  shall  apply  the  premium 

13  rate  as  above,  and  the  employer  shall  pay  to  the  treasurer  and  receiver 

14  general  of  the  commonwealth  an  amount  equal  to  one  per  cent  of  the 

15  premium  figured  upon  such  additional  pay  roll. 

1  Section  4.    Upon  the  occurrence  of  a  personal  injury,  a  subscriber 

2  under  this  section  shall  immediately  forward  to  the  industrial  accident 

3  board  a  report  of  such  injury,  and  shall  pay  compensation  as  provided 

4  by  Part  II,  section  four  of   chapter  five   hundred  and   seventy-one 

5  of  the  acts  of  the  year  nineteen  hundred  and  eleven,  and  amendments 

6  thereto. 

1  Section  5.     Upon  the  failure  of  a  subscriber  to  make  payments  in 

2  accordance  with  the  order  of  the  board,  as  provided  in  the  previous 

3  section,  or  the  order  of  the  board  made  after  investigation  or  hearing, 

4  the  industrial  accident  board  shall  immediately  forward  a  report  to 

5  the  attorney-general,  who  shall  forthwith  institute  suit  in  the  name 

6  of  the  commonwealth  for  the  benefit  of  the  injured  employee,  and 

7  may  proceed  against  the  security  deposited  with  the  treasurer  and 

8  receiver  general. 


1917.]  SENATE  —  No.  370.  49 

1  Section  6.    Upon  the  failure  of  a  subscriber  to  make  the  payments 

2  as  ordered  by  the  industrial  accident  board,  the  employee  or  his  de- 

3  pendents  shall  be  entitled  to  double  compensation.     Failure  on  the 

4  part  of  a  subscriber  to  conform  to  the  orders  or  requirements  of  the 

5  industrial  accident  board,  the  insurance  commissioner,  or  any  com- 

6  mission  or  board  having  authoritj-  relative   to   the  transaction  of 

7  business  or  the  safety  of  employees  under  the  workmen's  compensation 

8  act,  shall  be  deemed  sufficient  cause,  after  such  hearing  as  the  in- 

9  surance  commissioner  may  determine,   for  the  cancellation  of  the 
10  permit  of  such  subscriber. 

1  Section  7.    The  provisions  of  Part  VI,  in  so  far  as  appHcable, 

2  shall  apply  to  the  Massachusetts  Employees  Insurance  Association. 

1  Section  S.     This  act  shall  take  effect  upon  the  first  day  of  January 

2  in  the  year  nineteen  hundred  and  eighteen. 


50  COMPENSATION  INSURANCE  RATES.        [Feb. 


AN  ACT  RELATIVE  TO  PAYMENTS  TO  EMPLOYEES  FOR 
PERSONAL  INJURIES  RECEIVED  IN  THE  COURSE  OF 
THEIR  EMPLOYMENT  AND  TO  THE  PREVENTION  OF 
SUCH  INJURIES. 

1  Section  L    Part  V  of  chapter  seven  hundred  and  fifty-one  of  the 

2  acts  of  the  year  nineteen  hundred  and  eleven,  as  amended  by  chapters 

3  one  hundred  and  seventy-two  and  five  hundred  and  seventy-one  of 

4  the  acts  of  the  year  nineteen  hundred  and  twelve,  is  hereby  further 

5  amended  by  inserting  after  the  word  "twelve",  in  the  last  line  of 

6  section  two,  the  following:  —  or  an  employer  who  has  received  a 

7  permit  issued  by  the  insurance  commissioner  as  provided  in  Part  VI 

8  of  this  act,  —  so  as  to  read  as  follows:  —  "Subscriber"  shall  mean  an 

9  employer  who  has  become  a  member  of  the  association  by  paying  a 

10  year's  premium  in  advance  and  receiving  the  receipt  of  the  association 

11  therefor,  provided  that  the  association  holds  a  license  issued  by  the 

12  insurance  commissioner  as  provided  in  Part  IV,  section  twelve,  or  an 

13  employer  who  has  received  a  permit  issued  by  the  insurance  com- 

14  missioner  as  provided  in  Part  VI  of  this  act,  —  and  by  striking  out  all 

15  of  said  section  three  of  said  Part  V  and  inserting  in  place  thereof  the 

16  following :  —  Section  S.    The  association  shall  file  mth  the  insurance 

17  department  its  classifications  of  risks  and  premiums  relating  thereto 

18  and  any  subsequent  proposed  classification  or  premiums,  together 

19  with  any  schedule  or  plan  for  adjusting  the  rate  to  the  hazard  of  the 

20  occupation,  none  of  which  shall  take  effect  until  the  insurance  com- 

21  rnissioner  has  approved  the  same  as  reasonable  and  proper  for  the 

22  risks  to  which  they  respectively  apply. 

1  Section  2.     Part  IV  is  hereby  amended  by  striking  out  section 

2  two  and  insertmg  in  place  thereof  the  following:  —  The  board  of 

3  directors  of  the  association  shall  consist  of  twentj^-one  members,  who 

4  shall  hold  office  for  the  term  of  one  year  or  until  their  successors  are 

5  qualified.    Eleven  of  said  directors  shall  be  appointed  by  the  governor 

6  from  the  members  and  ten  to  be  elected  by  ballot  by  the  members,  as 

7  the  by-laws  may  provide.     At  least  seven  days  before  the  annual 

8  meeting  of  the  association  for  the  election  of  officers,  the  governor  of 

9  the  commonwealth  shall  appoint  eleven  directors,  and  shall  immedi- 

10  ately  •  certify  to  the  secretary  of  the  association  that  such  appoint- 

11  ments  have  been  made. 


1917.]  SENATE  — No.  370.  51 

1  Section  3.    On  and  after  January  first,  nineteen  hundred  and 

2  eighteen,  no  person,  firm,  corporation  or  company  shall  enter  into 

3  any  contract  to  pay  compensation  under  the  terms  of  chapter  seven 

4  hundred  and  fifty-one  of  the  acts  of  the  year  nineteen  hundred  and 

5  eleven,  and  acts  in  amendment  thereof  and  in  addition  thereto,  except 

6  the  Massachusetts  Employees  Insurance  Association  and    any  self- 

7  insurer  who  has  received  a  permit  as  a  subscriber  from  the  insurance 

8  commissioner. 

1  Section  4.    Section  four  of  Part  II  of  chapter  seven  hundred  and 

2  fifty-one  of  the  acts  of  the  year  nineteen  hundred  and  eleven,  as 

3  amended  by  section  one  of  chapter  ninety  of  the  general  acts  of  nine- 

4  teen  hundred  and  sixteen,  is  hereby  amended  by  striking  out  said 

5  section  and  inserting  in  place  thereof:  —  Section  4-    Whenever  an 

6  injury  to  an  employee  has  been  reported  the  insurer  shall  pay  com- 

7  pensation  for  such  injury  if  the  employee  is  incapacitated  for  a  period 

8  of  at  least  ten  days  from  earning  full  wages.    Such  compensation  shall 

9  begin  on  the  eleventh  day  after  the  injury  and  shall  be  paid  on  the 

10  seventeenth  day  after  the  injury,  unless  the  industrial  accident  board, 

11  or  a  member  thereof,  issues  an  order,  upon  the  -wTitten  request  of  the 

12  insurer,  suspending  the  payment  of  such  compensation  pending  an 

13  investigation  to  determine  the  liability  of  the  insurer.    When  com- 

14  pensation  shall  have  begun  it  shall  not  be  discontinued  except  with 

15  the  wTitten  assent  of  the  employee  or  the  approval  of  the  board  or  a 

16  member  thereof:   provided,  however,  that  such  compensation  shall  be 

17  paid  in  accordance  with  section  ten  of  Part  II  of  said  chapter  seven 

18  hundred  and  fifty-one,  as  amended  by  section  five  of  chapter  five 

19  hundred  and  eight  of  the  acts  of  the  j^ear  nineteen  hundred  and  four- 

20  teen,  if  the  employee  in  fact  earns  wages  at  any  time  after  the  original 

21  agreement  is  filed. 

1  Section  5.    Part  IV  of  chapter  seven  hundred  and  fifty-one  of  the 

2  acts  of  the  year  nineteen  hundred  and  eleven  is  hereby  amended  by 

3  adding  after  section  twenty-four  of  said  Part  IV  a  new  section,  to  be 

4  known  as  section  twenty-five:  —  Section  25.     The  directors  of  the 

5  Massachusetts  Employees  Insurance  Association  shall  be  directly 

6  responsible  on  failure  of  the  association  to  comply  with  any  lawful 

7  order  of  the  industrial  accident  board  or  of  the  insurance  commis- 

8  sioner,  and  shall  be  subject  to  a  fine  of  not  less  than  fifty  or  more  than 

9  five  hundred  doUars. 

1  Section  6.    Chapter  thi'ee  hundred  and  fourteen  of  the  special 

2  acts  of  nineteen  hundred  and  fifteen  and  chapter  two  hundred  of  the 

3  general  acts  of  nineteen  hundred  and  sixteen,  and  all  acts  and  parts  of 

4  acts  inconsistent  herewith,  are  hereby  repealed. 


52  COMPENSATION  INSURANCE  RATES.         [Feb. 

1  Section  7.    So  much  of  this  act  as  authorizes  its  acceptance  by  the 

2  Massachusetts  Employees   Insurance    Association    shall  take  effect 

3  upon  its  passage,  and  the  provisions  relative  to  the  appointment  of 

4  the  directors  of  the  Massachusetts  Employees  Insurance  Association 

5  shall  be  accepted  by  the  association  and  the  acceptance  filed  with  the 

6  insurance  commissioner  on  or  before  September  first,  nineteen  hun- 

7  dred  and  seventeen,  but  it  shall  not  take  effect  until  so  accepted,  and 

8  then  shall  take  effect  on  January  first,  nineteen  hundred  and  eighteen. 


1917.]  SENATE  —  No.  370.  53 


MINORITY   REPORT. 


I  am  unable  to  agree  with  the  report  of  the  majorits'  of  the 
committee  because  the  recommendation  that  all  insurance  com- 
panies, save  the  so-called  State  company,  be  eliminated  from 
business  is,  in  my  opinion,  entirely  outside  the  scope  of  the 
inquiry  which  this  committee  was  appointed  to  conduct. 
Reference  to  the  resolve  creating  the  committee  will  make  it 
plain  that  the  duty  of  the  committee  was  to  investigate  the 
subject  referred  to  in  the  message  of  His  Excellency  the  Gover- 
nor, particularly  with  regard  to  rate  making  and  accident  pre- 
vention, and  further  reference  to  the  message  of  the  Governor 
will  make  it  clear  that  that  which  dictated  the  special  message 
of  His  Excellency  was  a  problem  regarding  the  making  of  rates 
which  threatened  the  creation  of  an  insurance  monopoly  and 
the  elimination  of  weak  insurance  companies.  It  is  apparent 
from  the  reading  of  the  Governor's  message  that  the  creation  of 
a  monopoly  and  the  stifling  of  competition  is  something  which 
he  at  least  deplored. 

The  only  excuse  to  be  found,  in  my  opinion,  for  departing 
from  the  original  purpose  of  the  Governor's  recommendation 
would-  be  to  urge  that  State  fund  insurance  be  adopted.  The 
Ohio  system,  satisfactory  to  employer  and  employee,  because  of 
better  rates  to  the  former  and  greater  minimum  and  maximum 
benefits  to  the  latter,  has  few  opponents  in  that  great  industrial 
State.  The  committee,  not  being  able  to  unite  on  State  in- 
surance, but  with  a  reasonable  belief  in  its  efficiency,  proposes  a 
monopoly  which  I  believe  unfair.  No  reason  can  be  shown  why 
one  company  out  of  a  score  should  be  selected  by  legislative 
enactment  to  do  all  the  industrial  accident  insurance  of  the 
Commonwealth. 

During  the  hearings  before  the  committee  no  notice  was  given 
and  no  discussion  was  publicly  had  upon  the  matter  which  is 
the  main  recommendation  of  the  majority  of  this  committee. 
I  do  not  believe  that  any  insurance  company,  nor  any  body  or 


54  COMPENSATION  INSURANCE  RATES.        [Feb. 

number  of  employers  nor  any  persons  interested  had  any  notice 
or  knowledge  that  this  committee  was  considering  the  question 
of  eliminating  private  companies  from  competition.  That 
matter  has  been  before  the  Legislature  five  different  years,  and 
five  different  Legislatures  have  rejected  the  proposal  to  create 
a  monopoly  in  the  so-called  State  company.  It  seems  to  me 
that  it  is  decidedly  unfair  for  this  committee  to  make  a  report 
which  will  recommend  drastic  legislation  which  was  not  dis- 
cussed, and  with  respect  to  which  none  of  the  parties  interested 
had  the  right  to  be  heard  before  the  committee,  unless  that 
proposed  legislation  is  designed  to  give  state  fund  insurance. 
For  the  reason,  then,  that  the  recommendation  is  beyond  the 
scope  of  our  inquiry,  and  for  the  further  reason  that  interested 
parties  were  not  given  a  fair  opportunity  to  be  heard  upon  the 
question,  I  am  unable  to  concur  with  the  report  of  the  majority 
upon  this  question. 

The  problem  of  rate  making  was  the  principal  matter  dele- 
gated to  this  committee  by  the  message  of  His  Excellency  the 
Governor,  and  by  the  resolve  creating  the  committee. 

At  the  hearings  before  the  committee  representatives  of  the 
so-called  State  company,  of  other  mutual  companies  and  of 
several  of  the  larger  stock  companies  appeared,  and  from  the 
testimony  given  it  is  apparent  that  the  present  situation  as  to 
the  making  of  rates  in  Massachusetts  is  entirely  acceptable,  and 
that  whatever  defects  existed  in  the  plan  for  bureau  rate  mak- 
ing, as  it  was  originally  introduced  in  Massachusetts,  have  been 
eliminated;  and  it  was  the  testimony  of  every  insurance  repre- 
sentative who  appeared  before  the  committee  that  the  system 
was  entirely  satisfactory.  The  committee  has  investigated 
carefully  the  bureau  systems  in  vogue  in  the  city  of  New  York, 
and,  more  particularly,  the  National  Workmen's  Compensation 
Service  Bureau,  and  has  had  the  benefit  of  the  discussion  which 
took  place  at  the  conference  in  Washington,  D.  C,  besides 
studying  at  close  range  the  Ohio  system.  Upon  the  evidence, 
and  from  personal  inspection  of  the  systems  in  operation,  I  am 
convinced  that  there  is  no  need  of  legislation  to  alter  the  exist- 
ing method  of  rate  making  in  Massachusetts,  and  that  only 
State  fund  insurance  can  add  to  the  efiiciency  of  the  present 
system.     As  the  committee  does  not  purpose  to  go   to  this 


1917.]  SENATE  —  No.  370.  55 

length,  and  as  there  is  no  call  by  manufacturer  or  workman  for 
legislation  along  this  line  at  this  time,  I  propose  no  measure  for 
consideration. 

From  testimony  of  the  Insurance  Commissioner  of  Massa- 
chusetts, who  is  recognized  as  the  ablest  official  of  his  kind  in 
the  country,  it  would  appear  that  the  bureau  system  in  vogue 
in  Massachusetts  is  one  largely  devised  by  him  and  one  which 
at  least  meets  with  his  approval.  No  one  who  has  spoken 
before  the  committee  has  given  any  evidence  critical  of  the 
present  bureau  methods;  no  one  has  suggested  any  change; 
no  one  has  intimated  that  there  is  necessity  or  warrant  for  the 
concentration  of  this  insurance  in  one  monopolistic  company; 
and  therefore  I  am  of  the  opinion  that,  under  the  skillful 
guidance  of  the  Insurance  Commissioner,  the  bureau  system  as 
it  prevails  in  Massachusetts  can  be  made  to  serve  the  purpose 
for  which  it  is  designed,  and  ultimately  solve  the  problem  of 
rate  making. 

Some  testimony  was  given  before  the  committee  favorable  to 
the  establishing  in  Massachusetts  of  a  system  by  which  em- 
ployers of  financial  stability  will  be  permitted  to  extend  the 
benefits  of  the  compensation  act  to  their  employees  without 
insuring  their  liabilities  in  any  insurance  company.  I  do  not 
recognize  the  necessity  for  such  legislation.  The  interests  of 
labor  are  not  well  served  by  self-insurance,  since  such  a  system 
makes  for  too  intimate  contact  between  the  employer  and  the 
employee,  and  possible  abuses  resulting  from  that  close  re- 
lationship in  the  adjustment  of  losses  outweigh  any  probable 
benefit  that  may  be  derived  from  whatever  may  be  saved  in 
insurance  cost.  Under  the  insurance  situation  as  it  exists  to- 
day, while  there  is  competition  between  the  stock  and  mutual 
companies,  every  employer  has  an  option  to  choose  as  between 
the  two  classes  of  insurance,  and  as  respects  mutual  insurance, 
an  opportunity  is  now  afforded  him  practically  to  become  a 
self-insurer.  I  do  not  agree  that  there  is  need  for  self-insurance 
legislation. 

It  is  my  belief  that  healthy  competition  between  two  kinds 
of  insurance  which  is  extended  by  stock  and  mutual  companies 
is  not  only  desirable  but  in  the  interest  of  the  beneficiaries 
under  the  compensation  act.     The  testimony  of  the  chairman 


56  COIMPENSATION  INSURANCE  RATES.         [Feb. 

of  the  Industrial  Accident  Board  given  before  this  committee 
was  to  that  effect,  and  further,  from  his  testimony  it  would 
appear  that  the  treatment  accorded  to  the  injured  employees 
and  their  dependents  by  the  stock  liability  companies  was  at 
least  equal  to  that  of  the  proposed  so-called  State  company  and 
other  mutual  companies.  Since  the  rates  are  uniform,  and  are 
and  will  continue  to  be  made  equitable  by  reason  of  the  opera- 
tion of  the  Bureau,  and  further,  by  reason  of  the  law  requiring 
the  Insurance  Commissioner's  approval  of  their  adequacy,  the 
only  real  competition  that  can  exist  between  the  two  classes  of 
insurance,  or  between  any  of  the  companies,  is  competition  in 
service,  and  that  in  its  last  analysis  means  that  the  companies 
must  direct  their  efforts  toward  the  diminution  in  the  number  or 
severity  of  injuries,  that  is,  toward  accident  prevention,  and 
must  strive  to  excel  in  the  quality  of  the  service  rendered, 
which  means  in  the  humane  and  fair  treatment  of  the  bene- 
ficiaries under  the  act. 

It  is  at  least  worthy  of  notice  that  the  chief  recommendation 
of  the  majority  of  the  committee,  which  would  create  a  monop- 
oly of  the  insurance  business  in  this  line  in  Massachusetts,  and 
which  would  at  the  same  time  make  insurance  in  that  company 
compulsory  upon  practically  every  employer  of  labor  in  Massa- 
chusetts, would  at  the  same  time  amalgamate  the  employers  in 
Massachusetts  into  one  association;  and  it  is  conceivable  that 
so  powerful  an  amalgamation  and  organization,  opposed  as  the 
interests  of  its  members  must  necessarily  be  to  the  workingman, 
would  have  a  very  considerable  restraining  effect  upon  legisla- 
tion in  the  interests  of  the  worker  designed  to  benefit  under  the 
compensation  act. 

I  believe  that  the  workmen's  compensation  act  has  not  yet 
attained  its  greatest  usefulness.  I  believe  that  it  can  be  further 
extended;  and  that  greater  benefit  can  be  granted  to  victims  of 
industrial  misfortune.  I  believe  that  the  interests  of  the  workers 
demand  that  there  shall  be  no  control  vested  in  any  one  great 
corporation,  such  that  further  extensions  of  the  compensation 
principle  can  be  obtained  only  after  conflict  with  that  organ- 
ization. 

Many  pending  bills,  if  enacted  into  law,  can  be  of  vital  assist- 
ance to  the  employees.    Treatment  by  his  own  physician,  with 


1917.]  SENATE  —  No.  370.  57 

proper  safeguards,  can  be  accorded;  minimum  and  maximum 
benefits  may  be  advanced;  more  stringent  observance  of  laws 
compelling  safety  devices  should  be  required;  waiting  period 
reduced  to  seven  days.  All  these  benefits  will  come  in  time, 
and,  under  proper  credits  for  good  experience,  they  can  be 
given  without  financial  strain  upon  the  employer.  Schedule 
rating  presented  no  reason  for  the  employer  giving  heed  to  wel- 
fare work,  but  experience  rating  will  soon  convince  him  that  it 
is  wise  to  place  his  plant  in  safe  condition  and  secure  credits 
therefor. 

I  am  heartily  in  accord  with  the  recommendations  of  the  ma- 
jority of  the  committee  with  regard  to  the  transfer  of  powers 
from  the  Board  of  Labor  and  Industries  to  the  Industrial  Acci- 
dent Board.  I  am  also  heartily  in  favor  of  the  system  of  merit 
rating  which  is  dependent  upon  the  production  of  individual 
experience  warranting  alteration  in  the  basic  rate.  From  the 
testimony  given  before  this  committee  it  is  apparent  that  much 
has  been  done  by  the  private  insurance  companies  in  the  way  of 
welfare  work  and  in  the  promotion  of  campaigns  for  safety. 
Entirely  apart  from  the  other  reasons  given  in  this  report,  it 
seems  to  me  that  it  would  be  disadvantageous  to  the  cause  of 
labor  to  deprive  the  State  of  the  benefit  of  the  welfare  and  acci- 
dent prevention  work  which  has  been  conducted  by  the  insur- 
ance companies,  which  have  had  large  experience  in  such 
matters. 

I  agree  fully  with  the  committee  that  the  benefits  shown  in 
Ohio  of  a  consolidation  of  all  State  departments  having  to  do 
with  the  interests  of  the  workingman  would  be  of  incalculable 
advantage  to  him,  would  provide  him  with  home  access  to  those 
whose  duties  are  to  care  for  him,  and  would  save  the  State  a 
vast  amount  of  money  now  spent  in  duplication  of  work. 

As  has  been  said  in  this  report,  no  demand  has  been  made  by 
any  interest  offering  a  real  reason  for  the  elimination  of  the  pri- 
vate insurance  companies,  as  recommended  by  the  majority  of 
the  committee.  In  my  opinion,  every  interest  of  the  working- 
man  is  served  by  the  present  situation,  which  permits  competi- 
tion between  the  companies.  While  I  believe  that  it  would  be 
desirable  to  establish  in  this  Commonwealth  a  State  fund  which 
would  operate  as  does  the  State  fund  in  Ohio,  I  am  opposed  to 


58  COMPENSATION  INSURANCE  RATES.        [Feb. 

legislation  the  only  effect  of  which  is  to  give  to  a  private  cor- 
poration special  advantages  which  are  denied  to  other  similar 
corporations.  There  are  several  mutual  companies  in  Massa- 
chusetts older  and  as  efficiently  managed  as  the  Massachusetts 
Employees  Industrial  Association.  These  companies  have  been 
chartered  by  the  State;  they  have  large  investments  in  their 
equipment;  they  have  policy  holders  who  desire  to  continue 
their  insurance  with  them.  Apparently  no  thought  has  been 
given  as  to  whether,  if  one  company  is  to  be  selected  to  carry 
this  insurance,  some  of  the  other  companies  might  not  have  as 
good  a  claim  as  the  company  which  is  specially  favored  by  the 
recommendation  of  the  majority. 

There  is  nothing  to  prevent  the  partisans  of  any  company 
from  attempting  to  amend  the  bill  so  that  their  favorite  may 
become  the  beneficiary  of  the  proposed  legislation.  There  is 
nothing  to  prevent  two  or  more  companies  uniting  and  offering 
amendments  to  the  bills  presented  by  the  committee,  so  that 
they  may  have  the  monopoly  of  the  business. 

GEORGE  H.  JACKSON. 

Feb.  14,  1917. 


1917.]  SENATE  — No.  370.  59 


MINORITY  REPORT  FROM  THE  JOINT 
SPECIAL  COMMITTEE  ON  WORKMEN'S 
COMPENSATION  INSURANCE  RATES  AND 
ACCIDENT   PREVENTION. 


Boston,  Feb.  15,  1917. 

To  the  Honorable  Senate  and  House  of  Representatives  of  the  Commonwealth 

of  Massachusetts. 

Unable  to  concur  in  all  the  conclusions  and  recommendations 
of  my  associates  upon  this  special  committee,  I  file  herewith  a 
minority  report.  The  principal  recommendation  wherewith  I 
disagree  is  clearly  beyond  the  scope  of  our  instructions.  It  pro- 
poses to  solve  compensation  insurance  rate  making  by  abrupt 
and  arbitrary  exclusion  from  the  Commonwealth  of  all  but  one 
company  writing  this  business.  This  is  also  so  potentially  pa- 
ternalistic as  to  invite  my  further  earnest  opposition. 

1  endorse  the  majority  recommendations  touching  experience 
merit  rating  and  accident  prevention,  and  I  favor  some  proper 
consolidation  of  the  labor  boards  into  one  bureau.  I  also  agree 
with  the  majority  that  workmen's  compensation  insurance 
should  be  made  compulsory. 

The  narrative  statement  preliminary  to  the  recommendations 
of  the  majority  report  is  an  ample  and  comprehensive  review  of 
the  history  of  compensation  insurance  in  the  State,  and  also  of 
the  activities  of  this  committee,  which  have  been  painstaking  to 
a  degree. 

Excessive  Rates  not  in  Evidence. 

In  the  last  days  of  the  session  of  the  Legislature  of  1916,  out 
of  the  events  of  which  this  committee  was  created  by  special 
order,  there  was  heard  a  great  deal  about  "excessive"  rates 
charged  for  compensation  insurance.  Six  persons  representing 
employers  appeared  before  the  committee;  four  came  as  individ- 
ual employers;    one  represented  a  shoe  manufacturing  associa- 


60  COMPENSATION  INSURANCE  RATES.         [Feb. 

tion;  the  other  represented  employers  of  100,000  persons.  He 
did  not  report  nor  record  that  association  as  critical  of  the  rates 
charged  its  members.  In  fact,  this  association  recommended 
that  the  insurance  companies  work  out  their  rate  problems  to 
a  satisfactory  conclusion  before  any  legislation  be  attempted. 
Nor  did  the  individual  employers  complain  of  the  rates  they 
paid. 

Hence  I  am  by  no  means  satisfied  that  this  contention  of  ex- 
cessive rates  has  been  sustained  by  the  evidence  produced  at 
the  hearings  of  this  committee. 

Provision  for  Self-insurance. 

The  earlier  talk  of  "excessive"  rates  was  largely  voiced  by 
employers  carrying  very  large  pay  rolls.  The  form  the  state- 
ment took  was  that  on  the  rates  charged  the  premiums  were 
very  much  in  "excess"  of  their  experience  of  loss.  This  doubt- 
less was  true.  By  "self-insurance"  (a  misnomer  for  a  more  or 
less  prevalent  system  of  indemnifying  injured  workmen  under 
the  terms  of  the  compensation  act,  yet  without  legally  adopting 
it)  these  critics  were  enabled  to  indemnify  their  employees  at 
less  than  insurance  cost.  This  system  is  available  for  but 
relatively  few  employers. 

I  concur  with  the  majority  that  acceptance  of  the  workmen's 
compensation  act  by  employers  should  not  be  made  contingent 
upon  insurance  in  any  insurance  company.  Employers  should 
have  the  privilege  of  extending  the  benefits  of  the  act  to  their 
employees  without  insurance,  upon  satisfying  the  Insurance 
Commissioner  of  their  continuing  financial  ability  to  make  the 
payments  and  furnish  the  benefits  provided  by  the  act.  This 
privilege  is  accorded  employers  in  all  the  New  England  States 
except  Massachusetts,  and  in  most  of  the  highly  developed  in- 
dustrial States  of  the  Union.  For  the  purpose  of  putting  into 
effect  this  particular  recommendation  I  submit  as  an  appendix 
to  this  minority  report  a  draft  of  a  bill. 

No  Legislation  needed. 

The  evidence  before  the  committee  immediately  discovered 
and  emphasized  differences  between  the  stock  and  the  mutual 
companies  writing  compensation  insurance  as  to  the  manner  in 


1917.]  SENATE  —  No.  370.  61 

which  rates  were  being  made  and  the  manner  in  which  they 
beheved  they  should  be  made,  as  well  as  the  question  of 
adequacy  and  alleged  excessiveness.  The  differences  are  ap- 
parently the  inevitable  result  of  the  efforts  made  in  1912  to 
establish  a  compensation  insurance  monopoly,  which,  fortu- 
nately, was  averted.  It  has  been  impossible  to  smooth  out  the 
resultant  condition  of  affairs,  even  by  the  most  intelligent  and 
the  most  earnest  efforts  to  that  end.  It  happens  now,  however, 
that  rate  making  is  being  more  satisfactorily  done,  and  the 
occasion  for  legislation  is  still  further  eliminated.  I  feel  it  no 
part  of  this  committee's  jurisdiction  to  take  sides  in  this  contro- 
versy, but  rather  to  let  the  two  forms  of  service  continue  under 
the  supervision  the  Insurance  Department  is  helpfully  bestow- 
ing. Nor  yet  is  it  a  matter  for  legislation,  for  such  could  not  be 
framed  without  partisanship,  and  partisanship  is  not  a  legis- 
lative function.  Legislation  to  determine  a  business  dispute  is 
out  of  place  and  dangerous. 

Another  element  in  the  conditions  has  been  the  change  in  the 
scale  of  benefits  by  each  successive  Legislature  since  1912. 
This  does  not  mean  that  I  am  opposed  to  extension  of  benefits. 
I  favor  such  extension  and  put  myself  on  record  elsewhere  in 
this  report.  But  what  I  do  mean  is  that  the  annual  changes  in 
the  schedules  have  made  it  impossible  to  fix  accurate  rates 
because  of  the  lack  of  sustained  experience.  If  the  terms  of  the 
act  could  in  some  way  be  left  unchanged  for  a  reasonable  time, 
the  fixing  of  accurate  rates  could  be  easily  effected.  But 
changes  are  inevitable,  and  rate  making  must,  perforce,  proceed 
as  best  it  can. 

Much  was  said  to  the  committee  by  the  Insurance  Commis- 
sioner himself  about  "well-managed  companies,"  from  which  it 
appears  he  has  confidence  in  a  substantial  number  of  companies 
of  both  kinds.  The  excellent  security  furnished  the  insuring 
public  through  the  administration  of  the  Commissioner's 
present  supervisory  functions  is  substantially  all  the  present 
situation  demands  or  requires. 


62  COMPENSATION  INSURANCE  RATES.         [Feb. 


Commissions  ok  Compensation  Insurance  do  not  reduce 

Indemnities. 

A  fallacy  was  emphasized  during  the  hearings  that  was  mis- 
leading in  its  significance.  There  was  persistent  repetition  of 
the  statement  that  the  stock  companies'  acquisition  element  of 
one-sixth  of  each  dollar  of  the  premium  was  improperly  large, 
and  that  if  it  were  smaller  more  money  would  go  to  the  injured 
workman.  This  deduction  is  not  sound.  The  indemnity  is  fixed 
by  law.  It  is  paid  to  the  beneficiary,  and  has  no  relation  to  the 
premium  nor  any  element  in  it  beyond  the  single  fact  that,  by 
virtue  of  the  insuring  contract,  certain  obligations  are  to  be  met. 
That  a  certain  factor  of  the  premium  is  applied  one  way  or 
another  makes  no  difference  as  to  the  fulfillment  of  the  obliga- 
tion or  the  performance  of  the  contract.  For  a  similar  injury 
does  the  injured  workman  receive  more  from  a  mutual  com- 
pany because  of  its  smaller  acquisition  expense  than  from  a 
stock  company?     No. 

Commission   on    Compensation    Insurance    should    be 

retained. 

There  was  much  questioning  by  some  of  the  committee  along 
the  line  of  acquisition  expenses,  and  criticism  developed  in  the 
matter  of  this  17^  per  cent,  reported  by  the  stock  companies. 
Still  more  was  heard  about  the  payment  of  any  commissions  to 
brokers,  who  are,  of  course,  paid  out  of  the  figure  referred  to 
above.  There  is  much  to  be  said  in  favor  of  the  retention  of 
commissions  to  brokers,  though  it  is  a  matter  of  regret  that  the 
committee  heard  the  affirmative  aspect  of  this  phase  of  the  ac- 
quisition of  business  but  illy  presented.  In  this  factor  of  the 
acquisition  expense  of  stock  companies  the  special  or  local  agent 
and  the  broker  are  paid  out  of  the  gross  acquisition  cost,  and  in 
a  sense  stand  upon  a  not  dissimilar  footing.  The  special  agent 
represents  his  company  under  appointment  by  the  general  agent 
for  such  company.  The  broker  is  an  unattached  man  who 
places  insurance  for  his  clients  either  in  companies  they  elect  or 
that  he  advises,  generally  at  that  time  not  being  agent  for  any 
compensation  carrying  company  whatever. 


1917.]  SENATE  —  No.  370.  63 

Work  of  Education  by  Agents  and  Brokers. 

But  for  the  active  work  of  education  by  agents  and  brokers  it 
is  a  certain  fact  that  many  of  the  small  employers  of  the  State 
would  even  to-day  not  be  insured  under  the  terms  of  the  act. 
The  larger  employers,  more  conscious  of  conditions,  insured  at 
once.  If  the  experience  of  these  solicitors  could  be  summarized 
it  would  be  enlightening  to  learn  that  the  losses  these  selfsame 
small  insurants  have  sustained  would  in  many  cases  have  been 
ruinous  had  they  been  obliged  to  meet  the  obligations  directly. 
After  learning  the  conditions,  their  gladly  paid  premiums  have 
not  been  burdensome,  but  generously  protective.  The  laborer 
is  worthy  of  his  hire,  and  these  workers  in  this  field  earn  their 
money  none  too  easily. 

Mutual  companies  do  not  pay  commissions  to  agents  or 
brokers,  yet  a  considerable  staff  of  men  at  satisfactory  salaries 
is  employed.  These  men  do  a  variety  of  work,  combining  solici- 
tation with  other  work  and  other  work  with  solicitation.  A  not 
unimportant  part  of  this  work  is  analogous  to  that  of  the  agent 
or  broker.  The  division  of  the  salary  pay  roll  into  acquisition 
and  other  expense  cannot,  in  the  nature  of  things,  be  worked 
out  to  the  exactness  of  the  commission  rates  paid  by  stock  com- 
panies. Travel  and  other  expense  entailed  by  the  mutual's 
salaried  men  must  not  be  overlooked.  That  further  reduces  the 
difference.  The  campaign  of  education  by  the  mutuals  has  not 
been  overlooked. 

What  makes  Insurance  secure? 

Insurance  in  principle  and  in  fact  is  made  possible  largely  by 
its  volume,  and  safe  in  a  great  degree  by  that  very  volume  and 
also  by  its  widely  scattering  locations  and  different  kinds.  Then 
from  the  larger  volume  created  —  and  for  the  purposes  of  this 
statement  it  is  of  scant  concern  whether  it  is  placed  on  the 
books  of  the  various  companies  by  its  agents  or  by  brokers  — 
it  follows  that  the  elimination  of  the  broker  may  at  once  restrict 
the  wide  average  and  divergence  of  risks  just  so  much,  and  cor- 
respondingly endanger  and  weaken  the  whole  insurance  struc- 
ture.    The  amount  of  compensation  insurance  placed  in   the 


62  COMPENSATION  INSURANCE  RATES.         [Feb. 


Commissions  on  Compensation  Insurance  do  not  reduce 

Indemnities. 

A  fallacy  was  emphasized  during  the  hearings  that  was  mis- 
leading in  its  significance.  There  was  persistent  repetition  of 
the  statement  that  the  stock  companies'  acquisition  element  of 
one-sixth  of  each  dollar  of  the  premium  was  improperly  large, 
and  that  if  it  were  smaller  more  money  would  go  to  the  injured 
workman.  This  deduction  is  not  sound.  The  indemnity  is  fixed 
by  law.  It  is  paid  to  the  beneficiary,  and  has  no  relation  to  the 
premium  nor  any  element  in  it  beyond  the  single  fact  that,  by 
virtue  of  the  insuring  contract,  certain  obligations  are  to  be  met. 
That  a  certain  factor  of  the  premium  is  applied  one  way  or 
another  makes  no  difference  as  to  the  fulfillment  of  the  obliga- 
tion or  the  performance  of  the  contract.  For  a  similar  injury 
does  the  injured  workman  receive  more  from  a  mutual  com- 
pany because  of  its  smaller  acquisition  expense  than  from  a 
stock  company?     No. 

Commission    on    Compensation   Insurance    should    be 

retained. 

There  was  much  questioning  by  some  of  the  committee  along 
the  line  of  acquisition  expenses,  and  criticism  developed  in  the 
matter  of  this  17^  per  cent,  reported  by  the  stock  companies. 
Still  more  was  heard  about  the  payment  of  any  commissions  to 
brokers,  who  are,  of  course,  paid  out  of  the  figure  referred  to 
above.  There  is  much  to  be  said  in  favor  of  the  retention  of 
commissions  to  brokers,  though  it  is  a  matter  of  regret  that  the 
committee  heard  the  affirmative  aspect  of  this  phase  of  the  ac- 
quisition of  business  but  illy  presented.  In  this  factor  of  the 
acquisition  expense  of  stock  companies  the  special  or  local  agent 
and  the  broker  are  paid  out  of  the  gross  acquisition  cost,  and  in 
a  sense  stand  upon  a  not  dissimilar  footing.  The  special  agent 
represents  his  company  under  appointment  by  the  general  agent 
for  such  company.  The  broker  is  an  unattached  man  who 
places  insurance  for  his  clients  either  in  companies  they  elect  or 
that  he  advises,  generally  at  that  time  not  being  agent  for  any 
compensation  carrying  company  whatever. 


1917.]  SENATE  —  No.  370.  63 

Work  of  Education  by  Agents  and  Brokers. 

But  for  the  active  work  of  education  by  agents  and  brokers  it 
is  a  certain  fact  that  many  of  the  small  employers  of  the  State 
would  even  to-day  not  be  insured  under  the  terms  of  the  act. 
The  larger  employers,  more  conscious  of  conditions,  insured  at 
once.  If  the  experience  of  these  solicitors  could  be  summarized 
it  would  be  enlightening  to  learn  that  the  losses  these  selfsame 
small  insurants  have  sustained  would  in  many  cases  have  been 
ruinous  had  they  been  obliged  to  meet  the  obligations  directly. 
After  learning  the  conditions,  their  gladly  paid  premiums  have 
not  been  burdensome,  but  generously  protective.  The  laborer 
is  worthy  of  his  hire,  and  these  workers  in  this  field  earn  their 
money  none  too  easily. 

Mutual  companies  do  not  pay  commissions  to  agents  or 
brokers,  yet  a  considerable  staff  of  men  at  satisfactory  salaries 
is  employed.  These  men  do  a  variety  of  work,  combining  solici- 
tation with  other  work  and  other  work  with  solicitation.  A  not 
unimportant  part  of  this  work  is  analogous  to  that  of  the  agent 
or  broker.  The  division  of  the  salary  pay  roll  into  acquisition 
and  other  expense  cannot,  in  the  nature  of  things,  be  worked 
out  to  the  exactness  of  the  commission  rates  paid  by  stock  com- 
panies. Travel  and  other  expense  entailed  by  the  mutual's 
salaried  men  must  not  be  overlooked.  That  further  reduces  the 
difference.  The  campaign  of  education  by  the  mutuals  has  not 
been  overlooked. 

What  makes  Insurance  secure? 

Insurance  in  principle  and  in  fact  is  made  possible  largely  by 
its  volume,  and  safe  in  a  great  degree  by  that  very  volume  and 
also  by  its  widely  scattering  locations  and  different  kinds.  Then 
from  the  larger  volume  created  —  and  for  the  purposes  of  this 
statement  it  is  of  scant  concern  whether  it  is  placed  on  the 
books  of  the  various  companies  by  its  agents  or  by  brokers  — 
it  follows  that  the  elimination  of  the  broker  may  at  once  restrict 
the  wide  average  and  divergence  of  risks  just  so  much,  and  cor- 
respondingly endanger  and  weaken  the  whole  insurance  struc- 
ture.    The  amount  of  compensation  insurance  placed  in  the 


64  COMPENSATION  INSURANCE  RATES.        [Feb. 

stock  companies  by  brokers  is  so  large  as  to  be  an  important 
factor  in  the  security  of  the  business,  and  hence  the  security  of 
the  beneficiary. 

Accident  Prevention  should  be  fostered. 

As  to  accident  prevention  and  reduction  of  accidents  by  every 
means  reasonable  and  possible  there  can  be  but  one  view. 
The  employer  should  be  required  to  employ  every  proper  means 
he  can  command.  The  employee  should  equally  be  required  to 
use  such.  Credits  and  penalties  should  be  accorded  to  and 
exacted  of  the  employers,  and  penalties  exacted  of  or  imposed 
upon  neglecting  employees.  This  should  not  be  treated  as  a 
one-sided  matter.  Any  effective  method  of  reducing  the  terrible 
death  toll  and  of  reducing  the  greater  total  of  crippling  injuries 
may  well  command  the  instant  attention  of  the  Legislature,  and 
with  any  sound  effort  in  this  direction  I  am  in  cordial  and 
hearty  accord.  The  relation  between  these  conditions  sought 
and  results  accomplished  and  the  rates  for  compensation  insur- 
ance is  direct,  and  that  balance  will  adjust  itself  in  due  and 
proper  course. 

Out  of  the  evidence  presented  to  this  committee,  the  associa- 
tion of  employers  earlier  referred  to  may  be  accepted  as  speak- 
ing for  employers  generally.  Its  subcommittee  (given  full 
powers  of  recommendation)  submitted  to  this  committee  a  re- 
port that  so  emphasizes  the  keen  interest  and  concern  of  em- 
ployers on  this  especial  point  that  the  recommendations  are  not 
out  of  place  here,  and  particularly  so  when  the  desire  was  ex- 
pressed that  the  recommendations  find  place  in  this  committee's 
report.    The  association's  committee  recommended  as  follows: — 

Prevention  of  Accidents. 

1.  Safety  standards  should  be  adopted  with  due  allowance  made  for 
conditions  in  individual  plants. 

2.  Education  of  employees  through  shop  committees  or  otherwise, 
and  education  of  the  general  public  along  safety  lines,  shall  in  some  way 
be  counted  to  the  credit  of  the  employer.  The  National  Safety  Council 
recognizes  that  in  safeguarding,  mechanical  devices  equal  20  per  cent, 
and  education  equals  80  per  cent. 

3.  Neglect  to  use  approved  devices  or  obey  regulations,  approved  by 
the  State  Board  and  properly  posted,  shall  be  construed  as  "serious  and 


1917.]  SENATE  —  No.  370.  65 

wilful  misconduct,"  and  subject  the  workman  to  the  penalty  imposed 
by  the  compensation  act. 

4.  Some  plan  should  be  adopted  to  c6-ordinate  all  inspection  and  pro- 
vide adequate  training  for  the  inspectors. 

Insurance  Rates. 

1.  The  compensation  insurance  situation  is  generally  acceptable  to  . 
employers.    We  recommend  that  the  insurance  companies  work  out  then- 
rate  problems  to  a  satisfactory  conclusion  before  legislation  is  attempted. 

2.  Some  provision  to  permit  self-insurance  is  desirable  under  careful 
regulation  as  to  solvency  and  administration. 

Unrestricted  Competition  not  desirable. 

Unrestricted  competition  would  be  unsafe,  first,  for  the  ulti- 
mate beneficiaries  under  the  act;  next,  for  the  security  of  the 
contractual  obligation;  lastly,  for  the  unwisely  competing  com- 
pany. Self-invited  insolvency  would  of  course  defeat  the  pur- 
pose of  the  law.  But  the  knowledge  the  commissioner  has  of 
the  financial  responsibility  of  the  several  companies  —  and  it  is 
admitted  that  one  company  may  safely  write  this  business  at 
lower  rates  than  another  —  will  secure  all  the  safe,  normal  and 
healthy  competition  needed  to  spur  the  carrying  companies  to 
excellent  service.  All  of  this  the  commissioner  may  and  can 
now  control.  A  tactful,  wise  and  impartial  exercise  of  his  now 
quite  plenary  powers  by  our  commissioner,  to  whom  every  citi- 
zen using  insurance  of  any  sort  may  well  pay  tribute,  will  solve 
a  great  deal  of  the  troubles  now  existing. 

What  "Adequate"  should  mean. 

Approval  of  rates  through  the  power  now  lodged  in  the 
Insurance  Commissioner  will  prevent  the  charging  of  excessive 
rates,  while  that  same  power  will  enable  that  same  official  to 
determine  that  rates  are  "adequate,"  which,  of  course,  assures 
a  safe  minimum.  From  such  conditions  the  need  of  more 
definite  legislation  is  not  clearly  apparent.  The  quibbling  as  to 
the  meaning  or  significance  or  scope  of  the  word  "adequate" 
has  caused  more  trouble  than  it  is  worth.  "Adequate"  should 
be  taken  to  mean  a  rate  that  is  right  and  proper  and  reason- 
able, —  not  so  low  as  to  be  unsafe,  nor  so  high  as  to  be  ex- 
cessive. 


68  COMPENSATION  INSURANCE  RATES.        [Feb. 

tion  be  made,  when  it  could  now  be  accomplished,  if  the  in- 
suring public  saw  fit,  by  the  voluntary  decision  to  place  all 
risks  in  this  mutual. 

Governor  opposed  to  Insurance  Monopoly. 

The  committee  was  appointed  to  investigate  "the  subject- 
matter  contained  in  the  message  of  the  Governor  .  .  .  with 
.  .  .  reference  to  the  problems  of  rate  making  and  accident 
prevention." 

In  vain  I  have  searched  the  message  of  the  Governor  and  the 
order  creating  the  committee  to  find  any  warrant  whereby  the 
selection  of  one  company  and  the  exclusion  of  all  others  can  be 
justified. 

Instead,  I  find  this  sentence  in  the  Governor's  message:  — 

The  companies,  of  course,  should  not  be  permitted  to  indulge  in  un- 
restricted competition  by  the  adoption  of  rates  which  would  not  be  ade- 
quate to  the  insurance  they  extended,  and  which  might  result  in  the 
destruction  of  weaker  companies  and  the  creation  of  insurance  monopolies, 
and  an  ultimate  increase  in  rates. 

The  companies  it  is  proposed  to  exclude  —  both  mutual  and 
stock  —  are  duly  licensed  and  have  obeyed  the  laws  and  the 
rulings  and  requests  of  the  Insurance  Commissioner.  Both  mu- 
tual and  stock  companies  are  rendering  a  highly  specialized  serv- 
ice to  the  satisfaction  of  their  patrons.  This  proposed  exclu- 
sion is  an  unprovoked  and  uncalled-for  assault  upon  loyal  and 
honorable  quasi  public-service  institutions.  These  companies 
that  are  to  be  excluded  stand  in  the  position  of  having  been 
found  guilty  of  an  unpreferred  charge,  and  without  a  hearing, 
much  less  a  trial. 

If  this  State  can  or  if  it  is  to  regulate  workmen's  compensa- 
tion insurance  rates,  why  select  this  unusual  manner  of  doing 
it?  If  the  scheme  is  sound,  why  not  force  at  once  all  life  insur- 
ance business,  for  example,  into  some  one  company  which  some 
legislative  committee  shall  decide  is  the  best  company  for  such 
service?  Why  not  let  this  theory  be  extended  to  all  matters 
where  the  public  pays  a  price  for  a  commodity  or  service?  The 
analogy  is  perfectly  fair. 


1917.]  SENATE  — No.  370.  69 


Paternalistic  Aspect   of  Majority  Recommendation. 

I  am  a  firm  disbeliever  in  State  insurance.  But  the  question 
here  is  not  that  of  the  State's  establishing  a  monopolistic  State 
fund,  though  the  majority  report  discusses  the  Ohio  State  fund 
in  great  detail.  The  recommendation  provides  a  company  with 
a  moral  backing  by  the  State,  simply  one  step  this  side  of  a 
State  fund.  There  may  be  some  arguments  in  favor  of  a 
"Simon-pure"  State  fund,  but  no  justification  for  conferring  the 
proposed  monopoly  upon  any  private  insurance  company. 

The  majority  recommendation  smacks  of  undesired  and  dan- 
gerous paternalism.  The  attempt  at  monopoly,  defeated  in 
1912  and  every  year  but  one  since  then,  was  paternalistic,  and 
the  present  recommendation  of  the  majority  is  no  less  so.  A 
compulsory  State  fund  is  one  thing,  but  a  compulsory  private 
monopolistic  company  is  quite  another. 

Encroachment  of  Politics  threatens. 

The  Legislature  has  several  times  expressed  its  opinion  upon  a 
proposition  almost  exactly  the  same  as  the  majority  now  puts 
forward.  The  only  change  of  importance  proposed  in  the  new 
recommendation  is  that  the  Governor  appoint  a  majority  of  the 
board  of  directors  from  among  the  policy  holders  of  the  pro- 
posed company.  The  majority  report  offers  a  certain  and  defi- 
nite opportunity  for  the  encroachment  of  politics.  The  change 
will  impose  upon  the  Governor  the  needless  and  thankless  task 
of  canvassing  the  policy  holders  for  timber  for  insurance  com- 
pany directors.  The  men  large  enough  for  this  sort  of  quasi- 
public  service  are  likely  to  be  too  busy  with  their  own  large 
affairs  to  enthuse  over  such  a  new  responsibility;  and  the 
smaller  men  who  might  be  available  because  of  their  lesser  busi- 
ness exactions  are  not  the  sort  of  men  who  should  be  selected. 

Present  Conditions  satisfactory. 

These  observations  upon  the  principal  issue  in  the  majority 
report  raise  the  single  question  of  the  commonplace  wisdom  of 
the  State's  compelling  the  place  or  the  contractual  performance 


70  COMPENSATION  INSURANCE  RATES.        [Feb. 

of  its  statutory  compensation  obligations,  which  are  now  being 
otherwise  and  amply  fulfilled. 

This  is  an  obligation  which  employers  are  glad  and  ready  to 
assume,  and  which  is  the  thinly  spread  burden  society  is  willing 
to  bear  as  the  ultimate  consumer. 

The  workmen's  compensation  principle  is  one  that  none 
would  wish  to  see  abrogated  or  in  any  way  limited  in  its  appli- 
cation. Further  legislative  assaults  upon  employers  are  not 
warranted  by  the  industrial  record  of  this  State.  It  cannot  be 
gainsaid  that  legislation  thrust  upon  Massachusetts  industries, 
in  spite  of  which  they  nevertheless  exist,  has  been  in  many  in- 
stances undesired,  undesirable,  injurious,  burdensome. 

Desire  to  enrich  the  Act. 

The  hearings  of  this  committee  evidenced  the  desire  of  em- 
ployers, equally  with  the  employees,  to  enrich  the  act  and  to 
extend  its  benefits  in  the  broadest  practicable  way.  I  am  frank 
to  say  that  it  was  a  disappointment  to  me,  and,  I  believe,  to  the 
committee  as  a  whole,  that  the  employers  were  not  represented 
in  greater  number  to  express  their  satisfaction  with  existing 
conditions.  Cumulative  evidence  is  not  needed  to  establish  an 
obvious  fact,  but  it  is  impressive,  vital  and  important  of  itself 
as  evidencing  the  widespread  atmosphere  of  favor  in  which  the 
industries  of  the  State  are  living  vvith  regard  to  this  particular 
thing. 

Present  Insurance  Service  satisfactory. 

Out  of  all  this  I  lead  up  to  a  point  I  wish  to  emphasize  more 
than  any  other.  We  find  employers  desire  to  have  the  compen- 
sation act  well  administered.  We  find  employees  critical  of  the 
shadow  rather  than  of  the  substance.  We  find  the  insurance 
service  praised  by  the  Insurance  Commissioner,  and  it  is  agreed 
to  be  amply  flexible  for  all  needs. 

If  legislation  be  at  all  the  reflection  of  opinion  of  the  public 
or  of  any  considerable  portion  of  the  public,  then  there  can  be 
no  justification  to  compel  the  employers  to  buy  this  service  from 
one  company  when  they  could  do  the  same  thing  out  of  free 
choice. 


1917.]  SENATE  — No.  370.  71 


Stock  Insurance  largely  predominates. 

The  vastly  larger  number  of  stock  companies  doing  casualty 
and  compensation  business  in  this  country  as  against  the  very 
small  number  of  mutuals  doing  similar  business  is  a  fact  worth 
recording.  It  is  a  still  more  significant  fact  that  not  over  5  per 
cent,  of  the  compensation  business  in  the  country  is  carried  by 
mutual  companies.  The  stability  of  mutuals  as  respects  long- 
deferred  claim  obligations  remains  to  be  demonstrated.  The 
stability  of  stock  companies  as  respects  long-deferred  claim 
obligations  has  been  amply  and  repeatedly  demonstrated. 

Warning  against  State  Fund. 

Though  the  majority  does  not  recommend  a  State  fund,  yet 
the  Ohio  State  fund  is  discussed  in  great  detail.  It  requires 
slight  imagination,  only,  to  foresee  an  effort  to  go  one  step 
further  than  the  majority  recommendation  and  suggest  a 
monopolistic  State  fund.  As  a  foreword  of  forewarning  I  sub- 
mit an  observation  gained  as  a  result  of  the  activities  of  this 
committee.  There  is  a  great  deal  to  be  said  in  opposition,  but 
I  shall  be  brief. 

The  recent  social  welfare  conference  at  Washington,  which 
this  committee  attended,  devoted  no  small  number  of  papers  to 
the  subject  of  State  funds  only,  as  well  as  to  State  funds  and 
insurance  companies  in  competition.  The  papers  may  fairly  be 
summarized  as  discovering  a  not  inconsiderable  atmosphere  in 
favor  of  the  latter  and  scarcely  any  for  the  former,  a  position 
that  is  still  further  supported  by  the  fact  that  in  ten  States 
where  the  proposition  to  establish  State  funds  has  been  offered 
it  has  been  rejected.  Regarding  the  Ohio  State  fund  there  is 
sufficient  difference  of  official  opinion  as  to  its  solvency  to  cause 
doubt,  at  least,  of  the  system's  success.  The  bankruptcy  of  the 
Washington  State  fund  is  affirmative  evidence  of  the  unsound- 
ness of  the  State  fund  system. 

Insurance  Commissioner's  View. 

If  the  advice  of  our  excellent  Insurance  Commissioner  has 
any  place  in  guiding  or  directing  the  Legislature  in  its  action,  it 
is  interesting  to  note  what  is  said  by  this  man,  whose  place 


72  COMPENSATION  INSURANCE  RATES.         [Feb. 

among  the  ofBcials  of  this  kind  in  the  country  is  acknowledged 
to  be  not  only  eminent  but  pre-eminent.  In  a  report  to  the 
Legislature  in  1916,  after  observations  on  the  proposed  increase 
in  rates,  etc.,  he  observes  on  page  xix.,  "...  I  am  one  of  those 
who  believe  that  private  enterprise  should  carry  on  all  kinds  of 
business  instead  of  the  State,  at  least  until  it  is  clear  that  the 
State  can  do  it  better  and  cheaper." 

When  we  consider  the  evidence  of  the  commissioner  before 
this  committee  in  conjunction  with  all  other  evidence,  the 
quotation  was  clearly  intended  to  apply  literally  to  a  State  fund 
in  the  event  of  the  failure  of  "private  enterprise."  Still,  I  do 
not  believe  I  am  misinterpreting  the  quoted  words  vv'hen  I  say 
it  is  hardly  likely  he  limited  the  meaning  of  "private  enter- 
prise" to  a  single  designated  mutual  company,  when  the  recqrd 
constantly  finds  his  praise  of  both  stock  and  mutual  organiza- 
tion and  service.  I  believe  "private  enterprise"  meant  business 
competition.  Private  enterprise  and  public  patronage  will  cause 
the  fittest  to  survive.  If  that  be  the  test  with  the  individual  it 
should  be  the  test  with  business. 

Loss  OF  Revenue  to  State. 

The  total  compensation  premiums  received  by  all  the  com- 
panies in  1915  —  the  last  report  at  hand  —  was  S4,204,769.23. 
The  mutual  companies  received  81,385,727.95.  The  stock  com- 
panies received  $2,819,041.28.  The  mutual  companies  paid  a 
tax  of  1  per  cent,  on  their  premiums,  or  $13,857.28.  The  stock 
companies  paid  a  tax  of  2  per  cent,  on  their  premiums,  or 
$56,380.82.  To  be  exact  it  should  be  said  that  this  amount  is 
subject  to  reduction  by  a  relatively  small  sum,  as  the  stock 
companies  of  Massachusetts  charter  pay  a  tax  on  their  capital 
stock  and  not  on  their  premiums.  Practically  all  the  stock 
companies  are  foreign  to  the  State  as  a  matter  of  charter.  If 
all  the  premiums  are  paid  to  this  proposed  single  mutual  the 
State  will  lose  in  revenue  1  per  cent,  of  the  non-State  stock 
company  premiums.  For  the  purpose  of  this  slightly  inexact 
statement  —  with  data  a  year  old  —  it  is  safe  to  say  this  loss 
will  be  not  less  than  $25,000  a  year.  The  1916  figures  of 
premiums  will  be  larger,  and  the  loss  will  follow  in  exact  pro- 
portion. 


1917.]  '       SENATE  —  No.  370.  73 


Majority  Contention  not  sustained  by  Evidence. 

When  successful  business  men  differ  so  conclusively  about  the 
respective  merits  of  stock  and  mutual  insurance;  when  they 
freely  exercise  their  choice;  when  the  public  does  not  suffer  by 
the  exercise  of  their  choice;  when  no  defects  in  principle  or 
administration  are  revealed;  when  the  beneficiaries  under  the 
act  do  not  suffer  under  either  form;  when  the  public  is  not  a 
complainant  nor  is  a  burdened  purchaser  of  industrial  pro- 
duction under  the  dual  system;  when  employers  do  not  com- 
plain of  the  dual  system,  but  adopt  the  form  each  feels  best 
serves  his  business  needs;  when  employees  through  their  organ- 
ization urge  State  insurance  only  academically  and  without 
constructive  plan;  when  exclusion  was  not  asked;  when  central- 
ization in  any  one  company  was  not  asked  for;  when  the 
insurance  department  through  its  official  head  does  not  con- 
demn but  commends;  when,  I  say,  all  these  negations  are  dis- 
covered I  certainly  cannot  agree  with  the  principal  finding  and 
recommendation  of  the  majority.  I  cannot  agree  that  the  com- 
mittee should  go  beyond  the  tasks  assigned  it  or  go  outside  the 
evidence  presented. 

Therefore,  I  expect  and  believe  the  Legislature  will  not  re- 
verse its  position  so  wisely  taken  in  1912,  and  which  no  events 
of  the  intervening  years  and  no  examinations  of  the  conditions  of 
to-day  will  justify. 

Respectfully  submitted, 

JOHN   G.  FAXON. 


74  COMPENSATION  INSURANCE  RATES.         [Feb. 


Appendix  to  Minority  Report. 


An   Act  FOR   THE    Protection  of  Employers  by  Individuals  and 

Corporations. 

Be  it  enacted,  etc.,  as  follows: 

Section  1.  Any  employer  subject  to  the  provisions  of  chapter  seven 
hundred  and  fifty-one  of  the  acts  of  the  year  nineteen  hundred  and  eleven, 
and  acts  in  amendment  thereof  and  in  addition  thereto,  may,  upon  giving 
satisfactory  evidence  to  the  insurance  commissioner  of  his  financial  re- 
sponsibility, together  with  an  agreement  to  pay  to  all  persons  entitled 
thereto  the  compensation  and  other  benefits  provided  by  Part  II  of  said 
chapter  and  acts  in  amendment  thereof  and  addition  thereto,  apply  for 
and  obtain  a  certificate  from  said  commissioner  entitling  such  employer 
to  all  the  rights,  privileges  and  immunities  of  a  subscriber  under  said 
chapter  and  acts  in  amendment  thereof  and  addition  thereto.  Such 
employer  shall  thereupon  become  liable  to  make  all  payments  provided 
in  said  Part  II  and  acts  in  amendment  thereof  and  addition  thereto,  and 
shall  also  be  subject  to  the  provisions  of  Part  III,  sections  twenty  and 
twenty-one  of  Part  IV,  and  Part  V  of  said  chapter  and  acts  in  amendment 
thereof  and  addition  thereto,  said  employer  being  substituted  for  the 
association  in  applying  the  provisions  of  said  Part  III,  sections  twenty 
and  twenty-one  of  Part  IV,  and  Part  V  and  acts  in  amendment  thereof 
and  addition  thereto. 

Section  2.  Before  issuing  such  certificate  the  insurance  commissioner 
may  in  his  discretion  require  from  such  employer  a  suitable  bond  to  secure 
the  performance  of  his  obligation  hereunder,  which  may  be  either  the 
individual  bond  of  such  employer,  secured  by  the  deposit  of  cash  or  securi- 
ties approved  by  said  commissioner,  or  a  surety  bond  of  some  surety  com- 
pany authorized  to  do  business  in  this  commonwealth.  Such  bond  shall 
run  to  the  commonwealth  of  Massachusetts  and  be  conditioned  for  the 
due  and  prompt  payment  of  all  sums  which  such  employer  may  become 
liable  to  pay  under  the  provisions  hereof.  Any  person  entitled  to  receive 
any  such  payment  may  in  any  proceeding  in  his  own  name  under  section 
eleven  of  Part  III  of  said  chapter  seven  hundred  and  fifty-one  and  acts 
in  amendment  thereof  and  addition  thereto  set  up  and  rely  upon  such 
bond,  and  the  court  may  make  such  decree  for  enforcing  the  liability  of 
such  bond  as  may  appear  necessary  or  appropriate.  In  case  of  cash  being 
deposited  it  shall  be  placed  at  interest,  and  the  accumulation  of  interest 


1917.]  SENATE  — No.  370.  75 

or  dividends  on  said  cash  or  securities  shall  be  paid  to  the  employer  deposit- 
ing the  same. 

Section  3.  The  insurance  commissioner  may  in  his  discretion  revoke 
any  such  certificate,  whereupon  the  rights,  privileges  and  immunities  of 
the  holder  thereof  shall  cease,  or  said  commissioner  may  at  any  time  re- 
quire the  holder  of  such  certificate  to  deposit  additional  cash  or  securities. 

Section  4.  All  acts  and  parts  of  acts  inconsistent  herewith  are  hereby 
repealed. 


76  COMPENSATION  INSURANCE  RATES.         [Feb. 


DISSENTING  OPINION. 


As  a  member  of  this  committee  I  have  attended  every  meet- 
ing and  have  heard  all  the  evidence,  have  made  every  pilgrim- 
age earnestly  and  faithfully,  and  I  concur  with  the  committee  in 
all  its  conclusions  and  recommendations  except  that  pertaining 
to  self-insurance.  At  the  conclusion  of  our  hearings,  when  all 
the  evidence  was  in,  our  committee  voted,  with  one  exception, 
for  the  conclusions  and  recommendations  incorporated  in  the 
majority  report;  at  that  time  I  reserved  the  right  to  comment 
upon  my  opposition  to  self-insurance.  In  order  that  we  might 
accomplish  some  definite  good  for  the  Commonwealth,  which 
has  been  most  generous  with  its  finances,  and  which  has  com- 
mitted to  us  the  duty  of  relieving  its  employers  of  unnecessary^ 
financial  burdens,  I  voted  with  the  majority  of  the  committee, 
because  great  good  would  result  to  the  employee  and  to  the  em- 
ployer if  all  insurance  companies,  with  their  horde  of  lawyers 
and  professional  arbitrators,  their  technical  defences  and  their 
indifference  to  the  sufferings  and  needs  of  the  injured  workman, 
were  eliminated  from  the  workmen's  compensation  act.  How- 
ever, now  that  two  members  of  said  committee  —  one  of  whom 
is  an  insurance  agent  or  broker,  with  unctuous  comment  calcu- 
lated to  commend  him  to  all  except  the  injured  workman,  and 
another  member,  who  has  at  all  times  seemingly  been  in  accord 
with  the  committee  and  who  voted  for  the  majority  report  — 
have  seen  fit  to  dissent  from  the  most  vital  part  of  the  report, 
namely,  the  exclusion  of  the  insurance  companies,  I  feel  at  lib- 
erty to  voice  my  bitter  protest  against  self-insurance,  as  my  ex- 
perience in  the  trial  of  causes  under  the  act  has  proven  to  me 
that  some  employers,  now  practically  under  self-insurance,  be- 
cause of  the  personal  loss  involved,  oppose  viciously  and  un- 
scrupulously the  meritorious  claims  of  their  injured  workmen. 
If  compulsory  compensation  insurance,  made  so  necessary  by 
the  decision  of  Ashton  v.  Boston  &  Maine  R.R.,  222  Mass.  65, 


1917.]  SENATE  — No.  370.  '  77 

were  to  accompany  self-insurance,  my  objection  to  the  latter 
would  be  less  violent,  but  compulsory  insurance  must  be  de- 
layed until  the  Constitution  is  amended,  and  until  then  I  am 
opposed  to  all  schemes  of  self-insurance. 

WILLIAM  H.  SULLIVAN. 

Boston,  Feb.  15,  1917. 


78 


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SENATE  — No.  370. 


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COMPENSATION  INSURANCE  RATES. 


[Feb. 


Earned  Premiums,  Massachusetts  Business. 


Company. 

1912. 

1913. 

1914. 

1915. 

^tna, 

SIO.5,674  02 

$285,012  88 

$215,469  47 

$220,816  56 

American  Fidelity, 

31,517  11 

59,535  72 

5,558  12 

487  80 

Casualty  Company  of  America, 

89,221  03 

172,428  32 

158,307  48 

199,390  79 

Employers  Indemnity,      .... 

- 

~  m 

1,525  00 

10,290  35 

Employers  Liability 

562,?58  52 

1,233,302  36 

887,061  78 

800,968  06 

Fidelity  and  Casualty,      .... 

31,999  18 

72,653  53 

63,577  03 

48,502  75 

Fidelity  and  Deposit,        .... 

17,827  77 

56,862  28 

55,223  14 

40,166  01 

Frankfort  General 

.50,573  76 

79,349  79 

45,914  85 

38,631  25 

General  Accident 

12,422  62 

30,057  10 

43,710  60 

23,230  73 

Globe  Indemnity 

16,089  70 

51,933  01 

55,393  75 

43,366  92 

Hartford  Accident  and  Indemnity, 

- 

- 

34,384  16 

39,584  73 

London  Guarantee, 

70,871  37 

144,668  92 

87,846  73 

104,001  30 

London  and  Lancashire,  .... 

- 

2,385  28 

15,640  10 

785  91 

Maryland  Casualty, 

55,364  33 

107,296  29 

72,929  83 

69,843  10 

Massachusetts  Bonding 

22,005  40 

88,272  75 

123,559  35 

139,775  29 

New  Amsterdam,      ..... 

- 

- 

1,862  13 

9,286  91 

New  England  Casualty 

23,174  71 

•  98,877  14 

101,363  55 

103,655  68 

Ocean  Accident, 

32,007  01 

70,336  27 

58,548  58 

46,617  13 

Preferred  Accident 

873  16 

- 

- 

- 

Prudential  Casualty,          .... 

- 

- 

1,075  84 

2,403  75 

Royal  Indemnity 

61,888  74 

116,568  52 

101,570  55 

77,583  74 

Standard  Accident, 

24,614  07 

43,367  06 

33,208  04 

33,831  71 

Travelers, 

299,567  41 

786,703  44 

742,635  89 

616,281  31 

United  States  Casualty,   .... 

22,066  35 

58,685  07 

39,509  17 

46,974  39 

United  States  Fidelity  and  Guaranty,     . 

15,882  87 

75,671  59 

70,967  38 

58,919  27 

Zurich  General, 

» 

8,823  00 

39,597  01 

34,645  84 

Totals 

?1,545,899  13 

$3,642,790  32 

$3,056,440  13 

$2,819,041  28 

American  Mutual 

$342,320  26 

$657,953  41 

$344,351  28 

$347,103  09 

Contractors  Mutual,           .... 

35,862  19 

137,425  19 

136,323  29 

124,202  97 

Massachusetts  Employees  Ins.  -Ass'n, 

261,319  23 

671,841  41 

842,136  76 

855,395  32 

Security  Mutual 

- 

- 

50,311  17 

59,026  57 

Totals 

$639,501  68 

$1,467,220  01 

$1,379,122  50 

$1,385,727  95 

Grand  totals 

$2,185,400  81 

$5,110,010  33 

$4,435,562  63 

$4,204,769  23 

1917.] 


SENATE  — No.  370. 


83 


Losses  incurred, 

Massachusetts  Business. 

Company. 

1912. 

1913. 

1914. 

1915. 

.Etna 

$34,112  14 

$156,671  92 

$132,045  40 

$188,831  81 

American  Fidelity 

10,330  85 

28,527  39 

1,598  25 

4.803  00 

Casualty  Company  of  America, 

30,144  00 

109,669  37 

65,549  87 

192,086  33 

Employers  Indemnity 

- 

- 

390  00 

4,003  07 

Employers  Liability,         .... 

114,904  48 

519,501  06 

494,108  36 

545,731  61 

Fidelity  and  Casualty 

8.946  57 

39,929  31 

32,022  12 

38.229  55 

Fidelity  and  Deposit 

5,894  85 

44,140  32 

41,366  86 

34.088  15 

Frankfort  General, 

15.963  47 

45,700  75 

13,570  40 

25.902  54 

General  Accident, 

4,932  20 

29,269  12 

28.244  51 

20.869  93 

Globe  Indemnity, 

5,643  09 

25.313  03 

30.525  97 

49.006  94 

- 

- 

29,311  37 

25.321  59 

London  Gu.irantee,  ..... 

8.471  96 

64,822  91 

65,829  69 

115.763  74 

London  and  Lancashire 

- 

3,946  49 

13,772  86 

299  00 

Maryland  Casualty 

12,297  13 

63,219  01 

50,426  44 

104.839  54 

Massachusetts  Bonding 

11,440  42 

24,955  03 

101,426  00 

113.779  43 

New  Amsterdam 

- 

- 

4,200  07 

8.348  66 

New  England  Casualty,    .... 

9,333  90 

27,207  55 

68,273  61 

101.241  78 

Ocean  Accident, 

8,953  54 

33,123  87 

25,734  66 

53,673  95 

Preferred  Accident 

362  00 

- 

- 

- 

Prudential  Casualty,         .... 

- 

- 

514  16 

1.182  01 

Royal  Indemnity, 

20,382  91 

47,953  47 

51,842  54 

76,177  29 

Standard  Accident,            .... 

10,634  87 

20,760  95 

14,095  10 

48,427  07 

Travelers, 

123,013  57 

320,641  49 

421,520  68 

495.354  06 

United  States  Casualty 

6,556  64 

27,530  41 

27,603  74 

58.016  33 

United  States  Fidelity  and  Guaranty,     . 

7,437  00 

47,143  00 

40.592  84 

23.674  33 

Zurich  General, 

12,204  39 

16.554  51 

46.459  07 

$449,755  59 

Sl.692,230  84 

$1.771. 120  01 

$2,371,355  81 

American  Mutual, 

$55,909  25 

$192,028  75 

$315,146  45 

$269,178  52 

Contractors  Mutual,          .... 

16,182  27 

52,456  55 

35,044  ,30 

80,492  86 

Massachusetts  Employees  Ins.  .\ss'n. 

92,584  49 

273.711  46 

367,164  94 

503,291  53 

Security  Mutual, 

- 

~ 

18,433  97 

25,203  53 

Totals 

$164,676  01 

$318,196  76 

$735,789  66 

$878,166  44 

Grand  totals 

$614,431  60 

$2,210,427  60 

$2,506,909  67 

$3,249,522  25 

84 


COMPENSATION  INSURANCE  RATES. 


[Feb. 


General  Administration  Expenses  incurred,  Massachusetts  Business. 


Company. 

1912. 

1913. 

1914. 

1915. 

Mtna 

818,044  86 

$34,546  01 

$32,169  82 

$43,769  96 

American  Fidelity 

7,771  55 

4,352  06 

678  09 

1,341  52 

Casualty  Company  of  America, 

6,138  41 

12,453  68 

15,561  63 

30,314  91 

Employers  Indemnity 

- 

- 

- 

1,335  70 

Employers  Liability,          .... 

41,288  79 

60,925  14 

43,377  32 

55,831  96 

Fidelity  and  Casualty 

5,740  92 

7,265  35 

6,181  59 

5,808  07 

Fidelity  and  Deposit 

13,504  45 

8,608  95 

6,880  80 

5,851  74 

Frankfort  General, 

6,403  40 

7,300  18 

4,591  49 

5,189  35 

General  Accident, 

5.928  93 

2,825  36 

0,599  09 

4,845  64 

Globe  Indemnity 

4,258  98 

6,545  82 

6,359  20 

5,089  14 

- 

- 

8,348  47 

10,508  92 

London  Guarantee, 

13,673  31 

8,590  72 

6,853  32 

10,265  79 

London  and  Lancashire 

- 

906  41 

3,706  70 

551  06 

Maryland  Casualty 

12,884  32 

19,924  63 

8,905  23 

10,965  19 

Massachusetts  Bonding 

5,558  49 

12,358  19 

12,669  16 

18,164  28 

New  Amsterdam 

- 

- 

356  97 

1,397  71 

New  England  Casualty,   .... 

5,629  61 

11,597  29 

13,805  72 

20,235  11 

Ocean  Accident 

6,201  39 

6,822  62 

4,699  06 

4.456  06 

Preferred  Accident, 

591  03 

- 

■ 

- 

Prudential  Casualty,          .... 

- 

- 

140  94 

341  33 

Royal  Indemnity 

6,904  31 

14,221  35 

12,320  51 

10,747  95 

Standard  Accident, 

8,555  07 

7,191  64 

6,501  85 

6,039  50 

Travelers 

41,003  41 

109,810  98 

110,526  20 

91,677  81 

United  States  Casualty,   .... 

6,933  03 

7,276  95 

4,701  59 

6,768  47 

United  States  Fidelity  and  Guaranty,     . 

19,017  36 

16,448  66 

13,242  96 

12,669  07 

Zurich  General, 

- 

1,495  50 

3,801  37 

3,222  06 

Totals 

$236,091  62 

$361,468  09 

$332,979  08 

$367,388  30 

American  Mutual, 

$20,307  27 

$49,345  50 

$26,859  40 

$28,293  00 

Contractors  Mutual,          .... 

11,209  34 

17,955  10 

27,134  51 

25,701  36 

Massachusetts  Employees  Ins.  Ass'n, 

38,227  84 

103,968  75 

87,893  34 

71,716  08 

Security  Mutual 

- 

- 

1,775  75 

2,233  98 

Totals 

$69,744  45 

$171,269  35 

$143,663  00 

$127,944  42 

Grand  totals, 

$305,836  07 

$532,737  44 

$476,642  08 

$495,332  72 

1917.] 


SENATE  — No.  370. 


85 


Commissions  incurred,  Massachusetts  Business. 


COMPAST. 

1912. 

1913. 

1914. 

1915. 

i^tna 

$28,118  37 

$35,680  65 

$23,859  45 

$25,301  17 

American  Fidelity 

10,881  07 

5,053  17 

925  35 

85  37 

Casualty  Company  of  America, 

22,692  95 

33,394  56 

25,266  17 

36,183  01 

Employers  Indemnity 

- 

- 

458  00 

1,085  55 

Employers  Liability,         .... 

190,145  77 

187,319  47 

144,569  19 

141,342  46 

FideKty  and  Casualty,      .... 

11,066  91 

10,316  67 

9,746  72 

8,533  94 

Fidelity  and  Deposit,        .... 

7,748  46 

8,728  77 

9,324  11 

4,679  72 

Frankfort  General, 

15,081  28 

11,262  06 

7,203  30 

0,141  98 

General  Accident, 

5,605  44 

6,281  26 

6,334  77 

323  35 

Globe  Indemnity 

5,997  13 

9,238  54 

9,302  64 

7,898  23 

Hartford  Accident  and  Indemnity, 

- 

- 

10,717  69 

7,678  42 

London  Guarantee, 

24,267  98 

21,612  18 

14,336  51 

18,336  03 

London  and  Lancashire 

- 

1,475  13 

1,477  70 

328  02 

Maryland  Casualty, 

17,887  91 

15,963  46 

8,656  64 

9,820  89 

Massachusetts  Bonding,    .... 

3,958  14 

10,125  18 

17,293  37 

21,802  22 

New  Amsterdam 

- 

- 

761  14 

2,028  39 

New  England  Casualty 

9,656  05 

13,449  18 

17,949  29 

16,600  75 

Ocean  Accident 

9,785  45 

11,743  72 

8,444  16 

6,945  92 

Preferred  Accident 

376  15 

- 

- 

- 

Prudential  Casualty,         .... 

- 

- 

438  73 

170  20 

Royal  Indemnity, 

20.045  85 

15,843  42 

15,335  73 

13,422  93 

Standard  Accident, 

4.901  36 

2,005  44 

3,707  06 

6,712  67 

Travelers 

89,411  12 

89,797  16 

84,442  42 

78,769  80 

United  States  Casualty,   .... 

8,968  38 

8,425  84 

6,681  16 

11,359  40 

United  States  Fidelity  and  Guaranty,     . 

4,881  01 

5,950  22 

7,350  07 

6,134  41 

Zurich  General, 

~ 

.  3,406  27 

7,331  47 

6,180  55 

Totals 

$491,476  78 

$507,072  35 

$441,912  84 

$437,865  38 

American  Mutual, 

" 

- 

- 

- 

Contractors  Mutual,          .... 

- 

- 

- 

Massachusetts  Employees  Ins.  Ass'n, 

- 

- 

- 

- 

Security  Mutual, 

- 

- 

- 

- 

Totals 

- 

- 

- 

- 

Grand  totals 

- 

- 

- 

- 

86 


COMPENSATION  INSURANCE  RATES. 


[Feb. 


Taxes  incurred,  Massachusetts  Business. 


Company. 

1912. 

1913. 

1914. 

1915. 

^tna 

$2,515  52 

$5,918  02 

$4,210  15 

$4,517  43 

American  Fidelity 

1,243  54 

808  05 

111  15 

9  76 

Casualty  Company  of  America, 

3,320  11 

2,847  82 

2,888  50 

3,871  24 

Employers  Indemnity,      .... 

- 

- 

- 

371  65 

Employers  Liability,          .... 

21,730  94 

21,407  93 

17,144  39 

16,211  99 

Fidelity  and  Casualty,      .... 

1,264  79 

1,362  24 

1,151  64 

867  40 

Fidelity  and  Deposit 

885  54 

997  57 

1,065  62 

533  63 

Frankfort  General 

1,723  57 

1,344  65 

827  20 

703  12 

General  Accident, 

640  41 

718  06 

644  58 

185  30 

Globe  Indemnity 

649  25 

1,145  23 

1,104  92 

933  25 

- 

651  75 

893  31 

London  Guarantee, 

1,122  05 

2,448  47 

1,089  88 

2,044  15 

London  and  Lancashire 

- 

31  48 

249  15 

34  45 

Maryland  Casualty, 

2,044  33 

2,690  84 

1,279  26 

1,473  14 

Massachusetts  Bonding 

- 

- 

- 

New  Amsterdam 

- 

- 

87  00 

231  81 

New  England  Casualty 

- 

- 

- 

Ocean  Accident 

1,118  62 

1,442  14 

1,081  48 

912  54 

Preferred  Accident, 

44  13 

- 

- 

- 

Prudential  Casualty,         .... 

- 

- 

50  14 

—13  04 

Royal  Indemnity, 

2,290  96 

1,221  76 

1,855  59 

1,537  54 

Standard  Accident,            .... 

1,119  31 

706  35 

638  00 

876  81 

Travelers 

11,545  94 

14,188  45 

13,400  79 

12,735  47 

United  States  Casualty,   .... 

1,320  08 

—186  46 

689  54 

1,303  10 

United  States  Fidelity  and  Guaranty,     . 

- 

1,230  18 

1,425  00 

1,136  57 

Zurich  General, 

- 

389  29 

837  88 

706  35 

Totals 

S54,579  09 

$60,712  07 

$53,083  61 

$52,076  97 

American  Mutual, 

$7,252  60 

$3,604  62 

$4,184  96 

$3,528  43 

Contractors  Mutual,          .... 

- 

2,068  10 

888  49 

1,815  37 

Massachusetts  Employees  Ins.  Ass'n, 

7,392  56 

9,866  28 

9,182  99 

774  82 

Security  Mutual 

- 

1,885  12 

1,160  52 

Totals 

$14,645  16 

$15,539  00 

$16,141  56 

57,279  14 

Grand  totals, 

$69,224  25 

$76,251  07 

$69,225  17 

$59,297  21 

1917.] 


SENATE  —  No.  370. 


87 


Investigation  and  Adjustment  Expenses  incurred,  Massachusetts  Business. 


Company. 

1912. 

1913. 

1914. 

1915. 

iDtna 

$182  22 

S13.303  60 

$10,097  32 

$13,007  90 

American  Fidelity 

404  44 

8,435  62 

148  96 

2,791  25 

Casualty  Company  of  America, 

5,133  00 

11,479  00 

10,443  20 

6,395  11 

Employers  Indemnity,      .... 

- 

- 

- 

784  50 

Emploj'ers  Liability,         .... 

12,536  44 

79,881  26 

54,901  84 

61,470  35 

Fidelity  and  Casualty 

2,680  15 

9,935  93 

9,213  99 

9,402  49 

Fidelity  and  Deposit 

112  05 

6,824  41 

4,610  01 

2,721  68 

Frankfort  General 

1,998  33 

8,016  23 

6,157  82 

5,236  04 

General  Accident, 

45  00 

1,963  35 

10,676  22 

1,331  56 

Globe  Indemnity 

458  98 

5,345  75 

4,451  29 

6.720  61 

Hartford  Accident  and  Indemnity, 

- 

- 

3,688  71 

1,113  31 

London  Guarantee 

3,199  74 

10,551  85 

4,873  74 

6,570  33 

London  and  Lancashire,  .         . 

- 

461  00 

962  70 

—183  88 

Maryland  Casualty, 

495  84 

7,191  18 

—1,582  64 

8,908  29 

Massachusetts  Bonding 

7  40 

287  11 

13,201  15 

15,067  10 

New  Amsterdam, 

- 

_ 

181  53 

1,710  61 

New  England  Casualty,   .... 

1,036  12 

6,390  43 

4,556  81 

8,625  02 

Ocean  Accident 

282  62 

5,384  33 

4,504  66 

5,433  85 

Preferred  Accident 

47  85 

- 

- 

— 

Prudential  Casualty,          .... 

- 

- 

37  00 

—9  00 

Royal  Indemnity 

1,637  68 

17,057  65 

1,928  77 

11.028  17 

Standard  Accident, 

761  15 

2,251  09 

3,904  53 

4,947  80 

Travelers, 

25,307  77 

59,939  72 

39,724  76 

43,775  49 

United  States  Casualty 

72  00 

5,787  84 

3,374  42 

7,416  72 

United  States  Fidelity  and  Guaranty,     . 

893  89 

941  75 

1,575  75 

2,076  66 

Zurich  General, 

1,841  91 

4,425  65 

6,931  66 

Totals 

$57,292  67 

$263,271  01 

$196,058  19 

$233,641  38 

American  Mutual 

$5,719  51 

$6,353  91 

$23,115  02 

$14,387  38 

Contractors  Mutual,           .... 

556  11 

7.167  64 

5,033  84 

8,491  56 

Massachusetts  Employees  Ins.  Ass'n, 

2,865  73 

15,477  56 

21,422  23 

32,767  37 

Security  Mutual, 

- 

- 

1,877  28 

3.655  78 

Totals 

$9,141  35 

128,999  11 

$51,448  37 

$59,302  09 

Grand  totals 

• 

$66,434  02 

$292,270  12 

$247,506  56 

$291,568  87 

88        COMPENSATION  INSURANCE  RATES.    [Feb.  1917. 


Inspection  and  Accident  Prevention  Expense  incurred, 
Massachusetts  Business. 


Company. 

1912. 

1913. 

1 

1914. 

1 

1915. 

^tna,         .        . 

$1,760  87 

$8,669  07 

$7,271  67 

$4,400  67 

American  Fidelity,    ...'.. 

- 

- 

- 

- 

Casualty  Company  of  America, 

1,305  00 

2,418  63 

705  00 

386  95 

Employers  Indemnity 

_ 

- 

- 

- 

Employers  Liability,         .... 

1,412  52 

6,833  41 

8,717  96 

5,249  86 

Fidelity  and  Casualty,      .... 

965  00 

500  00 

985  79 

1,071  IS 

Fidelity  and  Deposit,        .... 

350  00 

550  00 

273  14 

8  55 

Frankfort  General 

2,585  36 

2,318  02 

2,181  54 

890  50 

General  Accident, 

40  41 

453  47 

385  31 

203  19 

Globe  Indemnity, 

1,000  00 

1,360  94 

1,090  76 

1,130  97 

Hartford  Accident  and  Indemnity, 

- 

- 

92  92 

515  44 

London  Guarantee, 

1,411  89 

1,957  14 

1,311  39 

1,042  77 

London  and  Lancashire 

- 

- 

- 

- 

Maryland  Casualty 

408  75 

3.765  84 

4,342  14 

1,748  90 

Massachusetts  Bonding,    .... 

- 

1,053  43 

1,580  34 

2,510  13 

New  Amsterdam, 

- 

- 

- 

- 

New  England  Casualty,    .         .         .  ■       . 

- 

367  72 

430  84 

4,160  00 

Ocean  Accident 

475  41 

608  15 

864  70 

1,169  77 

Preferred  Accident,  ..... 

- 

- 

- 

- 

Prudential  Casualty 

- 

- 

74  90 

182  60 

Royal  Indemnity, 

909  27 

6,163  85 

4,296  20 

2,390  02 

Standard  Accident 

895  24 

482  64 

473  50 

698  21 

Travelers, 

11,601  48 

27,060  93 

16,421  87 

14,243  06 

United  States  Casualty,    .... 

2,002  63 

2,768  16 

2,685  71 

3,102  86 

United  States  Fidelity  and  Guaranty,     . 

- 

- 

- 

- 

Zurich  General, 

- 

585  10 

1,490  70 

841  61 

Totals, 

527,123  83 

$67,916  50 

$55,676  38 

$45,947  24 

American  Mutual 

$1,122  83 

$3,408  79 

$3,995  19 

57,601  45 

Contractors  Mutual,          .... 

614  96 

2,752  58 

2,551  63 

3,123  91 

Massachusetts  Employees  Ins.  Ass'n, 

2,307  28 

22,872  38 

20,848  02 

14,493  76 

Security  Mutual 

- 

- 

600  00 

1,014  57 

Totals 

$4,045  07 

$29,033  75 

$27,994  84 

$26,233  69 

Grand  totals 

$31,168  90 

$96,950  25 

883,671  22 

$72,180  93 

yr 


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